Newspaper article The Record (Bergen County, NJ)

Lease or Buy? Some Factors to Consider

Newspaper article The Record (Bergen County, NJ)

Lease or Buy? Some Factors to Consider

Article excerpt

Q. I listen to a very persuasive financial planner on the radio and he refers to an automobile lease as a "fleece." What's your take on that -- true or false? I know businesses seem to prefer leasing to purchasing things outright. Wouldn't the same principles apply to an individual?

Yes, the same principles would apply to an individual. However, even if your assumption that businesses prefer leasing is valid, I'm not sure I'd say the same for individuals. Whether to lease or to buy an automobile, one must consider both qualitative factors -- your interest in the vehicle, the model, its style and upkeep -- and quantitative factors -- the total cost.

The qualitative factors bear on one's personal priorities. For example, do you want to own the car? Maintain it? Enhance it? Is it on your personal list of "must haves"? Are you likely to drive it for a long, long time and keep it in shape? If the answer to these questions is "yes," then it probably makes more sense to purchase the car, assuming the numbers work for you.

But what if you'd rather have a new car every few years and leave the risks of ownership to someone else? What if you don't really care if it's a Chevy Malibu, Ford Fusion, or a Toyota Camry, but rather it depends on which manufacturer offers the best features and promotional deal next purchase cycle in a few years? Is your end game to walk away from the lease and the car at the termination of the lease? If the answer to these questions is "yes," then it probably makes more sense to lease the car, again assuming the numbers work for you.

With respect to the quantitative factors, it's a matter of both "cash flow" and "total cost of the deal." Of those, the cash flow is the easier to deal with. If cash flow is a constraint, the monthly lease payment is around $200, and a monthly principal and interest payment would be $350, then it would be a no-brainer, other things being equal. …

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