Is Leasing a Car Right for You?

Buying a car was a no-brainer when you were younger — but is leasing a better deal now?

By Deborah Jeanne Sergeant

You likely made many decisions as a young adult that would have different answers now. Vehicle ownership may be one you’re rethinking. Is leasing a car better than buying? Local experts agree that leasing and buying each offer a few pros and cons.

“On the surface, leasing a car appears a whole lot easier than going through the hassle of buying a vehicle and paying for all the maintenance and repair costs,” said Diana Apostolova, financial consultant with AXA Advisors LLC in Rochester. “Not only that, you get a new vehicle every three years or so, but you generally get to enjoy a smaller monthly payment as well, and not to forget the brand-new car smell.”

But at this age and stage of life, you may want to avoid the finance charges that leases incur. Even if you obtain a loan for a car, the interest will likely cost less than the finance charges. You also may be hit with excess mileage fees if you are enjoying travel during retirement.

Some choose leasing because they can’t afford payments on a car; however, if they choose to keep the car they’ve leased, the balloon payment at the end will likely stay out of reach, especially on a fixed income.

“It may cost you a lot more than you ever anticipated,” Apostovolva said. “And possibly the biggest disadvantage of leasing, in my opinion, is that leasing doesn’t build any equity in the vehicle. Resale value, even negligible, can come in handy when you’re back in the market for another car down the road.”

If you use the vehicle for a post-retirement business, you may be able to write off the lease payments; however, with purchased vehicles, you can write off mileage used for business, too.

When leasing, “you may have a better grasp on your future expense projections than owning, as leasing would eliminate substantially all of the repair costs,” Apostovolva said.

New cars are substantially more expensive than used, late-model vehicles. Purchasing a late-model vehicle reduces the amount of depreciation you pay and you will still have some warranty left.

“If you plan on holding onto your care for 10 to 12 years, buy,” said Jeff Feldman, certified financial planner and owner of Rochester Financial Services in Pittsford. “If you have a mechanic you can trust, just bring it in for service and repairs.”

If you’re unfamiliar with what you should look for in a used vehicle, it may help to bring along a mechanically-inclined friend to look over vehicles with you.

Some people, however, want a new car every three years. They may want to maintain the prestige of driving a new-looking vehicle for entertaining clients. New cars also offer the assurance of the vehicle running optimally.

For people with these concerns, leasing may be better since buying that often means the depreciation won’t be recovered.

Ultimately, deciding on whether to buy or lease a vehicle depends upon how long you intend upon driving the same car and how you plan to use it.