To Lease or Buy

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It is almost always better to buy an automobile for your business (or for yourself) than to lease.  But, here are some basic  Pros & Cons of each:

Times where it might be more advantageous to lease:

(1) You want a new car every couple of years.  Okay, if this is you, then I have some other advice for you.  Instead of trying to save a few dollars on your taxes by leasing, maybe you should take a Dave Ramsey course (unless you are able to pay cash for those new cars and you have maximized your IRA contributions, have no other debt and have 6 months living expenses in savings).  But, if you insist on getting a new car every couple of years, leasing will get you a better tax deduction than buying.

(2) You want a more expensive car with lower monthly payments.  See #1.

(3) You want a car that’s always under warranty.   I can understand this argument, but, if you crunch the numbers, car warranties and extended warranties are usually a complete ripoff.

(4) You dislike having to buy and sell used cars.  

Leasing is a really bad idea if any of the following apply to you:

(1) You usually drive the same car for 3 or more years,

(2) You drive more than 15,000 miles per year,

(3) You like cars that quickly lose their resale value (which is the case with most vehicles).

The best advice for most people is to pay cash for a really good used car and drive it for 5 years or more.  If you don’t have the cash and have to take out a loan, pay it off in a couple of years and then keep driving the car without a payment. This will allow you to save for a nicer car down the road.  The one thing you don’t want to do is to buy into the erroneous theory that “you are always going to have a car payment.”