Buying or leasing a car

Editor's note: The how-to/como hacerlo series on La Voz is a project to help inform Lancaster County's community and provide step-by-step information on navigating day-to-day processes. Click here for this story in Spanish.

You need a car. How do you pay for it?

Is it better to lease a new car or to buy it by financing it? It is not always a simple decision.

There are there are things you should know when making a decision to lease or to buy your new car.

Comprar o alquilar un auto [cómo hacerlo]

If you lease a car, your monthly payments are likely to be lower than if you bought it. However, when you buy a new car, you may pay more to finance it. In the end, you will own the car and will be able to trade it in and sell it. Once you pay your loan, you might have several years with a car you own and have no car payments. With a lease, you are likely to end up in a cycle of always having a car payment.

“It really depends on what you want,” says Eric Merling, sales manager of Keller Brothers Ford in Lititz. “Some people want to always have a new car. Since most leases are for about three years, you can have a brand new car with all the latest features.”

Merling reports that many customers at the Ford dealership prefer leasing because they get a new vehicle that is under warranty the entire time they drive it. When the lease is up, they get another new car. Leasing makes it possible to have a better car, because the lease payments are usually lower than loan payments.

Typically, when you buy a car, your loan payments will be longer. Many loans are for four, five or even six years. That means that when you pay off your car loan, your car is older and may have 70,000 miles or more on it. It is probably no longer under warranty, which means that you might have some repairs coming up. You will most certainly need to replace tires, batteries, brakes and other things on your car.

The best things about buying a car is that the car is yours once you pay off the loan. You can trade it in if you decide to buy a new car, and you will get money toward your new car.

Another good thing about buying a car is that you can drive it as far or for as many miles as you want. With a lease, you have mileage limitations, which are usually 12,000 a year. If you drive more than that, you will have to pay by the mile. That can add up.

“Most of our customers prefer to buy their cars,” says Rick Price, general manager of Lancaster Toyota. “They like the idea of ownership.”

Price reports that some customers are unsure about the leasing process. They are more familiar with buying a car and having a car they own after they pay off the loan.

Whether you buy or lease your new car, you will need to have your car properly insured for collision and liability.

So, how do you decide what is right for you?

To help you decide, here are some guidelines:

IF YOU BUY:

* You own the vehicle and get to keep it as long as you want it.

• Loan payments are usually higher because you’re paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes and fees.

• You can sell or trade in your vehicle at any time. Money from the sale can be used to pay off any loan balance.

• When you want a new car, it’s up to you to deal with selling or trading in your car.

• The vehicle will depreciate, but it will have some cash value.

* You can drive as many miles as you want.

* You don’t have to worry about wear and tear.

* At the end of the loan, you have no more payments.

IF YOU LEASE:

* You don’t own the vehicle. You get to use it but must return it at the end of the lease, unless you decide to buy it.

* Lease payments are almost always lower than loan payments because you are paying only for the vehicle’s depreciation during the lease term, plus interest charges, taxes, and fees.

* If you end the lease early, there may be penalty charges.

* At the end of the lease, you return the vehicle and walk away.

* It doesn’t affect you that the value depreciates.

* Most leases limit the number of miles you drive to 12,000 to 15,000 per year. You will have to pay charges if you exceed the mileage.

* You may have to pay for wear and tear.

* At the end of the lease, you can lease a new car or decide to buy.