Car Buying
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Buy or Lease?
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Once you know what sort of payments you can afford and the car you want, you'll want to consider if buying or leasing is a better choice for you.

It’s important that you take the time to read the lease contract/agreement. If you have a question about any terms or numbers, make sure that the salesperson explains them to you. If the salesperson doesn’t know or is not clear, or has to ask the sales manager more than two times – walk away from the lease! If they do not understand the terms of the lease, how could you?

Know Your Lease
A car lease is a rental agreement. You agree to use a car for a monthly payment for a certain length of time. You also agree to keep the car in good condition and to drive it no more than a specific number of miles. Many people, particularly those who want a new car to drive every two, three, or four years, find leasing to be a good option.

Two terms that you should know if you're thinking about leasing

Capitalized cost is the selling price or retail value of the car when you lease it. If there is a down payment, trade-in, or manufacturer's rebate, the capitalized cost will be reduced by these amounts, called the capitalized cost reduction. The number you have then is called the adjusted capitalized cost.

Residual value is the estimated worth of the car at the end of your lease.

The difference between the adjusted capitalized cost and the residual value divided by the number of months in the lease becomes one of two parts of your monthly payment.

The second part of the monthly charge is called a rent charge (sometimes called the money factor). The rent charge is the dealer's cost to acquire the car, plus the overhead. The rent charge and automobile taxes, divided by the number of months in your lease, are added to the monthly payment determined by the difference between the capitalized cost and the residual value.

You will find financial calculators at http://www.edmunds.com. They will prompt you for numbers associated with buying and leasing to help you determine the better choice for you.

Advantage of Leasing
The good thing about leasing is that you can lease a car with less money up front at relatively low monthly payments (note that most leases require a down payment, usually at a fixed amount). But at the end of the lease you won't have a car. You turn the car back to the dealer and lease another car. You can also buy the car for the pre-determined end-of-the-lease price.

Advantages of Buying a Car
Buying a car will require a down payment, as well as monthly loan payments that are probably higher than the monthly lease payments. Although buying will be more expensive initially, at the end of the loan you will own your car.

Additionally, you will not have the mileage penalty and selling restrictions that are part of a leasing arrangement. If you continue to drive your now-older car, and take care of repairs, you can enjoy years during which you won't have car payments. People who buy cars own them an average of seven years.