Car Buying
Good question: Leasing a Car? Is Leasing a Car a Good Deal, or Are you Better Off Buying?
By Madlen Read
Associated Press
Friday, June 17, 2005
Q: A lot of my friends are leasing cars now, but I was always told that it's
a bad idea. Is it ever smart to lease instead of buy?
A: Yes, but not usually. In most cases, leasing is a waste of money.
Car leasing fell in popularity after hitting a peak in the late 1990s, but has recently
been on the upswing as interest rates rise and as car makers offer new promotions.
Although you may pay less per month with a lease and be able to drive a flashier
car, most drivers will end up spending more money in the long run.
Let's say you want to drive a $40,000 car. If you lease it, you may pay only $30,000
over three years, but after those three years, you'll be giving up a car with several
years of use left in it. And if you decide to buy the car in the end, you'll have
paid more than $40,000. It's math that most people understand, but the temptation
of driving an expensive car can sometimes override logic.
But there are a few situations where leasing is a better choice than buying.
The first: "If you are someone who needs -- and the key word here is 'needs' --
to have a nice-looking car to perform well at your job," said Peter Bielagus, author
of "Getting Loaded," a personal finance guide for students and young professionals.
Many real estate agents lease cars because driving a new luxury car is necessary
to attract certain clientele. Leasing is a smart option for these folks if they
can't afford the purchase. That way, they can trade in the car for a new one every
few years.
Another situation where leasing a car may be a good idea is if the driver is self-employed,
because there are tax benefits.
"When you lease a car for all business use, the entire lease payment is deductible,
along with the other costs," said CPA Alan Lips, a partner with South Florida accounting
firm Gerson, Preston, Robinson & Co.
But even if you qualify for the tax write-offs, you should still check with your
accountant -- as you would with any big purchase -- to see if the lease's benefits
outweigh the drawbacks, Bielagus said.
For most other drivers, a leased car is an unnecessary drain. While it provides
the comfort of a brand-new car and often includes perks like free oil changes and
rental cars, there are many catches.
