October 2000

The basic difference between leasing and buying is that when you lease, you don't own the car. You are basically renting the car, and at the end of your lease, you give it back to the dealership (often with a final payment of a few hundred dollars). Or you can choose to buy the car for the remaining value.

Lease: Leasing requires the first month's payment, a refundable security deposit and capitalized cost reduction (basically a down payment).
Buy: When you buy, you'll pay the cash price or down payment.

Both options require paying taxes, registration and other fees.

Lease: Lease payments are typically lower than loan payments (if you need a loan to buy) because your monthly payments are based only on vehicle depreciation during the lease term, rent charges, interest, taxes and fees.
Buy: When you buy, monthly payments are based on the entire purchase price of the vehicle plus interest.

Lease: Leases typically limit the number of miles you can drive — usually 12,000 to 15,000 per year. You can negotiate higher mileage limits by paying a higher monthly payment. If you exceed the contract limits, you will need to pay additional charges when you return the vehicle.
Buy: There are no limits on mileage — drive to your heart's content. But keep in mind that the more miles you log, the lower your resale value.

Lease: Are you sloppy? Is car cleaning a last priority? Then leasing probably isn't a good bet for you. Most leases limit the amount of wear on the vehicle during the lease period. You will have to pay additional charges at the lease's end if the car's condition doesn't live up to the contract requirements.
Buy: If you own your car, anything more than normal wear and tear means a lower trade-in or resale value.

		Think about how important the above issues are to you and consider other factors, such as: If you're interested in driving a new car every few years, a lease is your best bet. If coming up with a down payment in a few years may be difficult, buying would be better for you because you'd have a trade-in. Contact your insurance company and inquire whether they have any special requirements with leases. You may find out that your policy isn't applicable to leases. Do you own a business? If so, you could possibly write off a leased vehicle on your taxes.	For more help with your decision, consult these resources: www.bog.frb.fed.us A joint effort of the Federal Reserve, the National Automobile Dealers Association and state regulators. www.carinfo.com Informative articles from consumer advocate and auto expert Mark Eskeldson. http://carpoint.msn.com A helpful advice site from Microsoft Network.