Articles > Leasing Articles > Lease versus Buy

Guest Article - By Terrence Jumbe of Vehicle consulting 4/02/06

Should I buy or lease my next car?

Is this fair?

Leasing versus Buying - 5 step guide

For most people leasing is a hassle-free, cost-effective and enjoyable
experience that returns them to lease again with their next car.

Through leasing they benefit from

Problems only arise for those who don’t sufficiently understand it or those whose preferences or driving habits are simply not suited to leasing.

1. Is leasing right for you?
  Probably, unless -
  • there is a reasonable chance that you might have to end your lease early.
  • you drive more than 15,000 miles per year.
  • you want to customize your car or make modifications.
  • you are emotionally attached to the idea of owning a car.
2. Choose the right car

Cars that have a high resale value and therefore high lease residuals make the best lease deals (see Parkers 100 Depreciation Guide); These are usually cars manufactured under brands best known for their quality and reliability. As a general rule, avoid cars that drastically change styles every year as they typically don’t hold their value very well and are more expensive to lease.

3. Know what to pay

Negotiate up from the manufacturer’s OTR (on-the-road) price for the car you want (see Parkers Price Guide) rather than down from the car leasing company’s price.

  • Remember that the quoted car price of the lease deal is always negotiable.
  • Your bargaining range is the difference between the manufacturer’s OTR price and the car leasing company’s quoted price.
4. Understand the Lease Deal

A good leasing deal is a combination of four elements (don’t just look at the advertised monthly payments):
[a] Low OTR price.
[b] Low lease factor (interest rate).
[c] Low administration fee
[d] High residual value.

Lease deals can be complex, and as with home mortgages, an independent broker with no ties to a particular finance provider or car manufacturer can give you transparent and impartial advice.

5. Keep your side of the deal
  When the deal is done protect the savings you’ve made.
(An excellent lease deal can rapidly become costly if you do not keep to the provisions in your lease Contract).
  • Set pro-rata monthly mileage targets based on your annual limit; take early action to bring your mileage back in line if these targets are consistently exceeded. Your car can be temporarily swapped with a low mileage driver or a rented car used for your high mileage excursions; as a last resort ask the car leasing company to adjust your mileage limit accordingly. All those measures will cost you far less than what you might have to pay in excess mileage charges.
  • Maintain your car along the guidelines provided in the owner’s manual (at the end of the contract you may be charged for any wear and tear deemed excessive, see our “Returning Leased Cars – A 6-Step Guide”).
  • Remember that, if a leased car is totally destroyed or stolen, this is considered a form of early termination. Unless you have gap insurance or a waiver in your lease contract, you are exposed to the same penalties and payments.
  • Enjoy your leased car!
This page was last updated on Sat, 31 March, 2012
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