Should You Buy Your Car or Lease It? Readers Weigh In

The debate over whether it's better to buy or lease a car is nothing new: Salesmen and experts, consumer advocates and finance writers have argued over the merits of leasing for decades. But between the still-shaky job market and Americans' stagnant wages, the question of whether it's better to own your rolling iron or rent it has taken on an additional urgency.

To get a better feel for the costs and benefits of leasing versus buying, we asked DailyFinance's readers to tell us about their experiences -- and you had a lot to say.

Investment

For a lot of car buyers, investment is a big concern -- and a complex one. After all, as a car ages, it depreciates in value, particularly during the first few years of ownership. Then you have to add in maintenance costs, which rise as a car gets older, making the vehicle that much more expensive to maintain during a period when it has already become worth far less. To further complicate things, these all tend to happen not so long after most people finish paying off their car loans.

One reader, Jacqueline Price, advocated ownership, noting that, when you buy a car, "At least you have something that is yours after you pay it off." Not only does this nicely shortcut the issue of buying a lease car at the end of the term, which Jacqueline notes can "costs a fortune," it has another bright side: "It is nice to look forward to not having a car payment."

"Redwolf0849" echoes Jacqueline's concerns, asking "Why put thousands up front to lease a car when you can use it as a deposit on a car you buy?" "Joe" offers a similar perspective, noting that "I have learned over the years that the most economical way to get around is to buy a high quality new car, take care of it, and keep it until it won't run anymore." That way, he claims, "You get the new car experience, beat the new car depreciation curve and you know what has and has not been done to the car."

But the investment issue can cut both ways. One reader, "Virginia," argues that the question is whether it's wiser to "invest $20,000 or more in an asset that depreciates in value, or in an asset that appreciates and generates income." Noting that all new cars lose some of their value, she goes on to point out that they are often technically inferior. After all, she writes, "safety features are constantly improving each new car year," and a 10-year-old car lacks "all the improvements in rear mirrors, side air bags, and tire pressure readouts" that have developed over the last decade.

Virginia notes that leasing makes it possible to get a new car every few years, often for far less money than a purchase would cost. The rest of the cash, she points out, "can generate 3.5% to 5% in annual income and has the potential for capital appreciation" if you invest it in "utilities or other stocks." Taken from this angle, the best car investment may be the money that you don't put into your auto.

Maintenance

And then there's the question of maintenance. While big repair bills don't usually arrive until a car has gotten older, occasionally an almost-new car will require an expensive visit to the mechanic. One reader, "RTMorse," wrote that he started leasing cars after he bought a "mint" Buick LeSabre -- only to have the "engine seize in the middle of the desert on a trip to Yosemite." Since then, he has leased three cars -- and has sometimes even gotten a return on his investment: "All of these vehicles were worth more than the residual at the end of the lease, so I purchased the Acura for the residual and sold it back to the dealer for a $1,000 profit."

Another reader, "Robert," echoed the residual value point, pointing out that "certain cars lose value quite [a bit] faster than others." Robert, who prefers to keep his cars for several years, notes that he tends to buy his leased cars "if after 3 years the mileage is limited and I like the way the car looks and feels." After 90,000 miles or so, when he decides to start searching for another vehicle, he writes "I have been amazed by the resale value that some of my cars have put in my pocket -- especially those with high residuals."

Preferences

Some readers argued that the decision to buy or lease boils down to what sort of person -- and driver -- you are. "Joe," a former GM car salesman, notes that one of the best things about leasing is that "If you are a single woman you don't have to worry about getting taken at a repair shop." "Nancy" agreed, writing that she really likes getting a new car every few years, not to mention being saved the trouble of dealing with big maintenance issues.

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The biggest issue, though, is how much you drive. Citing the additional charges that are tacked on for high mileage, Joe claims that "If you do not drive more than 15,000 miles a year, leasing is the way to go." "Don," from South Hadley, Mass., notes that, for most of his life, he put a lot of miles on his cars, which made buying more cost-effective. Now, however, his driving habits have changed: "I drive under 15,000 miles a year, so it might not make sense to keep a new vehicle into its declining years. I am seriously thinking of leasing a small, high mpg model if I can find a good deal."

Where you live can also make a difference. One reader, "Ron," argues that California's sales tax is structured so that "It makes absolutely no sense to purchase a new car unless you plan to keep it for a long time." On a purchase, "You pay sales tax based upon the entire price of the new car, regardless of the value of your trade-in," a factor that can greatly increase the cost of a new car. On a lease, however, he writes that "you only pay sales tax on the monthly lease payment."

Then again, even with a lease, it's still not possible to escape high-pressure sales tactics. "HG" tells the story of a Toyota Camry that his parents leased. At the end of the rental period, the family decided against another lease, and "the relationship with the dealer deteriorated." Given that HG's parents were 85, they asked the salesman what would happen when they were no longer able to drive the car. His response was "There are grandkids, aren't there?" an answer that HG found "a little too mercenary."

A Third Option

"Taina2" offers a succinct breakdown of the leasing argument, claiming that a lease enables you "buy the 'goodie' out of a car." But, while one can argue that lease periods generally cover the best years of a car's life, the cost-effectiveness of leasing might be overstated. Some readers neatly short-circuited the buy or lease battle with a third option: buying a low-mileage used car. "AllproInstall" notes that, by buying a "near mint, pre-owned vehicle with six or seven thousand miles on it," it is possible to get "a car that looks new, still smells new, is mechanically sound, and is also covered under factory warranty."

"RationalTactics" takes it a step further, deliberately targeting formerly leased cars. "I look for three year old lease returns that are in excellent condition with low mileage, and I negotiate a fair price." This value, he argues, only increases as he keeps the car for a longer period: "When I've kept the car for longer than three years, the cost has ALWAYS been MUCH CHEAPER than what it would've been to lease."

Another reader, "Richard," notes that buying used has enabled him to get a lot more car than he otherwise could afford. On any given day, he writes, "I can either drive my 2002 Lincoln Continental or drive my 1999 Porsche 911. I bought both of them used for forty cents on the dollar." Put another way, he writes, "I'm driving nice cars for the price my neighbor bought a new Hyundai."

In other words, when it comes to buying or leasing, some would argue that the best cars are the ones that manage to hit both points on the spectrum.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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