David A. Caplan, CPA, MBA - Certified Public Accountant

Q & A

Which is better: to lease a car or buy one?
-C.R., Philadelphia, PA

This is one of the most frequently-asked questions. Thanks to the media hype and obnoxious car commercials, everyone wants to lease a car. There clearly are times when leasing makes sense and when it does not. Leasing generally makes sense when a) you don't have a downpayment for a new car, b) you tend to hold a car for three years or less, or c) you are using it for business. If you normally own a car for five to ten years, and you can afford to buy one, then buy it. Remember that although it may be fun to have a new car every three years, there is a cost attached, and that cost can be steep. Also, when you lease a car, you never build equity in it, so that when your lease expires, you still don't have a trade-in. In other words, if you start to lease, you normally lease forever.

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