A decision to buy or lease a vehicle

Less than 14 percent leased vehicles in 2009 and in 2012 it has climbed to nearly 18 percent.  Lower interest rates and high value of used cars are behind the rise of leasing.

Leasing a vehicle is not suitable for everyone.  Surely, leasing is not for those who could afford to pay the full purchase price in cash because monthly leasing cost includes an interest.  One can argue that you can offset the interest by investing the money.  But in this lower interest rate environment which is expected to continue for several years, that argument may not hold true.

Leasing has its own merits.  The vehicle you lease will be under warranty during the lease period.  Also, under the current low interest environment, your monthly lease payment is also lower.  Higher residual value of a leased vehicle also affects the monthly payment.  Some high residual value vehicles include Acura, Audi, Honda, Toyota, Lexus, Mercedes-Benz and others.

If you are going to lease a vehicle rather than buying it, be sure to bargain the price of the vehicle.  The price of the vehicle under the leasing is called “cap cost”.  Lower “cap cost” will result in lower monthly leasing rate.  Pay attention to other costs too.

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