Auto Loan Tips

When Does Car Leasing Make Sense?

This Kiplinger's Personal Finance article will probably change some people's mind about whether to lease or buy a car. To me, the time-tested rule is still to buy a 2-to-3-year-old used car. You will get the best of both worlds: easier maintenance and better value.

Many leasers believe that instead of having nothing to show at the end of the lease, they've gotten the best years from a quickly depreciating asset.

A lease usually ends about the same time as the warranty, so you probably won't pay for any repairs. And you won't have to worry about whether you'll get a fair deal on a trade-in.

In most states, you pay sales tax only on the monthly payments rather than on the full value of the car. Plus, many of today's leases include gap insurance to cover the difference between the lease payoff and an insurance settlement if the car is totaled or stolen.

Yes, there are early-termination fees if you change your mind. But if you finance a car and bail out before the loan is paid off, you could easily owe more on the loan than the car is worth. And it's true that leasers pay extra for exceeding the 10,000- to 15,000-mile yearly limit typically written into a contract. But buyers who rack up high mileage also pay a penalty: lower trade-in value.