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Posted in Auto Loans
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TazTigre

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lease or buy? how do you figure what works best for your age and driving stats?
58 years old. No major bills. Have 7+ years to work. Light travel for now. Would it be. better to buy a car, or lease? What are the pit falls in leasing? What to look out for? What are you always responsible for in a lease?

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Usually better to buy

Leasing is often the most expensive means of driving a car.  Don't be misled by the low payment.

1.) The Truth In Lending Act requires dealers to disclose exactly how much the deal is costing you in principal, fees, and interest.  However, this does NOT apply to leases because they technically aren't loans.  When you lease, dealers bury the actual cost so deep in the contract verbiage that it's almost impossible to figure out how much is principal vs fees and interest.  If you worked it out mathematically, the rates amount to much more than the typical auto loan.

2.)  You have no equity in the vehicle.  Cars lose 50% of their value during the period you are leasing it., so you are paying for the most rapid decline in value during the life of the car.  Then you give it back, with nothing to show for all that money paid. 

3.)If you decide you want to buy the car at the end of your lease, the payoff amount plus payments you've already made amount to much more than the original price of the car.  By the way, most people end up having to buy out their lease because they put more miles on the car than the lease allows for.  The alternative is to pay a fee for each mile over the limit.  Either way, you would have been much better off buying the car upfront.

4.)  If you wreck the car, insurance will only pay enough to payoff the lease.  However, if you bought the car, the insurance pays up to 120% of the value of the vehicle (depending on your policy).

Leasing can be convenient if you are so financially secure that money is no object.  99% of the time however, it's better to finance it with a traditional auto loan, or better yet pay cash.

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