Should You Buy or Lease Your Next Car?

Deciding whether to lease or buy a car outright is a big decision. If you lease, you don't need to worry about wear-and-tear, or large maintenance bills. If the car is in good condition and under the mileage limit, you can return it after the lease term expires and choose a new one. In most cases, you can even drive away with the latest model with less cash upfront. A lease may also offer lower monthly payments, especially if you have good credit. However, leasing means that you're subject to mileage and other restrictions.

Alternatively, if you decide to buy, the car belongs to you. While leasing carries an ongoing monthly expense, purchasing outright means that there's an end to your payments. On the plus side, there are no mileage limits. On the down side, however, all maintenance costs are yours. And as car prices continue to rise, you may be forced to keep your car longer than you might ordinarily like.

Financial considerations

If you buy, financing can be a concern. Unless you have a big bank account, or an inheritance, you'll likely need an auto loan. Car loan rates for both new and used car loans vary significantly from lender to lender. There can be as much as a two percentage point difference. Shop around for the best auto loan.

If your credit isn't perfect, finding reasonable rates can require legwork. To get the best bad credit loan you can, shop rates at several different lenders. If your credit score is less than 600, you're in the high-risk group. In that case, don't just talk to conventional lenders-look at sub-prime lenders who specialize in bad credit car loans.

When your credit score has improved, you can always refinance car loan rates. Refinancing carries a number of benefits, namely, lowering your interest rates and reducing your loan payments by extending the loan term. Even if you have good credit, you may still benefit from refinancing if the current refinancing rate is lower than your original car loan rate.