Leasing

• When you lease a new vehicle, you pay only a portion of the car's value. For example, if you choose a car that's worth $40,000 and lease it for two years, the car will lose approximately one-third of its value; this is called depreciation. So the lender will calculate a payment based on about $13,000 and not the full $40,000. Some consumers choose leasing simply because the payments are lower.
  
  

Purchasing

• When you buy a car, you must pay the full purchase price of the vehicle at the time of the purchase, and if you finance the purchase, you must pay interest on the loan as well. This typically makes payments on car loans higher than those associated with leases. However, you can opt to sell the car once you've repaid the debt, which can be especially beneficial if you've taken good care of the car.
  
  

Repairs and Upkeep

• Leases may be attractive to some because the dealer is responsible for maintenance, including routine oil changes and tune-ups. This arrangement exists because the dealer will try to sell the car after the expiration of the lease, so it's in his best interests to make sure the car is is in good shape when it's returned. On the other hand, financed cars must be maintained by the owner.
  
  

New Cars

• Some consumers prefer leasing because it provides them with a new car every two to three years, allowing them to regularly trade up to top-of-the-line models. Those who finance cars must repay their loans before purchasing a new car or risk rolling a previously financed car loan into a new car loan, a cycle that can create serious problems if you are not financially disciplined.
  
  

Mileage

• Some leases can be very restrictive with their mileage allotments, especially if you're seeking a low monthly payment. Most lease lenders charge large fees for going over the mileage allowance, often as much as 5 cents per mile. This can add up quickly and cost you when the lease expires. There are no restrictions on mileage for cars purchased with a loan.