Auto Loan or Lease When Buying a New Car?

A Credit Article Contributed by Brandie King

Introduction to Auto Loan or Lease for Your New Car

When you go to buy a new car you have a decision to make: should you get an auto loan to buy it or should you lease it? You might already know which you want to do. If you do not know which option you want to take when buying your new car (lease or auto loan), then you need to learn about each method so that you can choose.

When Should You Choose to Get an Auto Loan over a Lease for Your New Car?

Quite a few leases have a provision in them that requires you to pay extra fees for each mile over a certain amount of mileage. That amount of mileage is normally somewhere between 10,000 and 12,000 each year, so if you plan on driving more than 12,000 miles per year then you should definitely choose to buy your car with an auto loan. If you like to keep your cars for a long time then buying is what will work better for you.

Since having a leased car means that you are paying for the privilege of driving somebody else's car for the length of the lease, you should choose to buy it with an auto loan if you want to be driving your own car. With leasing you will never have the chance to pay off the car you are driving.

When you choose to use a loan for your purchase, there will be an end in sight as far as paying it off, and you might just like the idea of being free of the debt and car payments once the end of the loan term comes around. And as a final thought as to why you should choose to buy with a loan instead of leasing, you normally can't change the way a leased car looks.

You can't customize it to be the way you want it without having to pay some hefty fees at the end of the lease term when you turn the car in. When you use a loan to purchase a new car, you can change the car in any way you choose.

When Should You Choose to Get Lease over an Auto Loan for Your New Car?

If you plan to drive 12,000 miles or less each year then you might find that a lease is for you. If you are the type of person that likes to trade your car in for a new one every 3 years (or less), then a lease would be a good choice for you because most leases are for a length of 2 to 3 years.

You might like to have a lower down payment and lower monthly payments, and if this is the case then you might find leasing to be what you are looking for because they usually come with lower payments and down payments as compared to auto loans. Another reason that leasing might be a idea for you is if you are the type of person that does a good job with the upkeep of your car and are normally pretty careful in the way it is treated.

With a lot of leases, there are what is called "Excess Wear and Tear" fees. If there is excess wear and tear when you return the car at the end of the lease term then you will be charged extra fees for that.