Leasing vs. Purchasing

Kirstie_H

Can't decide which is better for you? Want the upsides & downsides for each? This is the place to start!

kirstie_h
Roving Host & Future Vehicles Host

audifreak21

You always lose in the end with a lease. I am in financial planning and leasing is only good for business owners who can write it off. Leasing is only financially beneficial to the Auto Dealer, not to the consumer. But getting a $35k or $60k car for half the payment to buy per month usually is to tempting for people in our "I want it now" society. Seriously reconsider leasing a car if you can. Just imagine, do you think a dealer would actually give you the residual price for a car if you were trading it in to them after 3 years? No, so why are you going to pay the residual value for a car you could get for less? It's a win-win for the Auto Dealer. You give them thousands of dollars up front, rent the car and then buy it from them for a premium at the end...if you even buy it. And if you don't you have nothing to show for it. It's a vicious cycle.

kyfdx

This is really an over-simplification.. And the auto dealer? He makes the same, whether you lease or buy..

If your car isn't worth the residual at lease end? You walk away, secure in the knowledge that you came out ahead by leasing... If you bought the car, you would have lost that extra depreciation.. Now, the bank has to eat it..

Leasing isn't for everyone, and can sometimes be a bad deal.. but, your advice is way off base, and your reasoning is just plain wrong.

regards,
kyfdx

gold233790

That reasoning makes no sense. In fact, it is generally a very bad idea to purchase a car at lease end- UNLESS the car is easily worth more than the purchase price. But that is extremely rare.

I will also present you with my situation, in which it is preferable to lease. I own an older A8- probably worth about 12-13k. My wife has one year left worth of payments on her SUV, at which point we will own it free and clear. I don't want to get hit with additional car payments right now, and typically like to change vehicles every three years or so (A BIG FACTOR IN LEASING). So...I am going to sell my Audi, use the proceeds to pay my lease for a few years, and then have a year left on my lease while my wife continues to drive her Land Cruiser into the ground for the foreseeable future.

Anyway, there are many situations where leasing is not a bad option. For those of us who like to have a "change of scenery" every few years, purchasing is often not wise. Why own a car during the time when it takes it's steepest drop in value when you are going to sell it just as that drop starts to level off?

Take my A8. Bought it cash in '00. 66k+. Four years later, I can get maybe 13k for it. Now, if it had a few less miles, MAYBE high teens into 20. But not higher than that. So.....46k for four years. That equates to a shade under 1k a month. A little higher than a lease would be, and that doesn't factor in tax on my sale on either side- which probably bumps it over 1k/month for ownership.

If you are talking Toyota/Lexus, etc.- where I KNOW I can drive a vehicle for 5+ years without the very high possibility of significant upkeep (which IS the case with Audi- and if you disagree you've never owned many German cars out of warranty. Just takes one little problem....) then it is certainly a good idea to purchase.

In fact, in a world where most people cannot afford to car jump every few years, purchasing a car- long term- is the obvious choice. No question. If you were on the toyota corrolla board, I'd say you wouldn't find many who disagree with you.

But....in the area of luxury automobiles, the decision is often much less clear. In years past, Audi has offered some excellent incentives on their leases (my sister leased an '01 A6 for $379, that stickered for 39k) where it made a ton of sense to lease.

I don't love to gamble, which is what I feel owning an Audi over 50k miles equates to. I can afford to buy/lease the car, but don't love $3500 service calls.

steine13

"But getting a $35k or $60k car for half the payment to buy per month usually is to tempting for people in our 'I want it now' society."
Agreed. But like beer, just cuz some can't handle it don't mean it's a bad idea.

"You give them thousands of dollars up front, rent the car and then buy it from them for a premium at the end...if you even buy it."
Usually, the trick is not to buy it and let THEM own the car for the overinflated residual.

"And if you don't you have nothing to show for it."
Sure you do. 3 years or so of trouble-free, fixed-price transportation. And if you get into a $5k accident, the diminished value is someone else's problem.

We own our cars, but as an example, I've got 14 payments left, at $555 per, on our 03 Sienna. If I'd'a leased it, the payment would have been $200 less per month, easily. And if Toyota would have kicked in a few incentives, it might have been $250/month... saving $300/month or a cool $11k. The numbers are ok, btw, Honda ran $260 per on the Odyssey recently.

So... the way I see it, it comes down to this: What do I want in my hand after 3 years... the title to a 3-year-old van, or $11k cash? It is not a trivial question, depends a lot on the details.

Hoping you're a little more careful with your advice in your chosen profession, I remain
-Mathias

stickguy

I agree that the real debate is whether it's better (financially) to get a new car every three years, or buy and hold for a long time.

Once that decision is made, leasing just becomes a financing option (which in reality it always was).

The best thing that can happen with a lease is the residual was set way to high. That means you paid less to own the car the you really "should" have (in other words, you used more of the value than estimated), and you turn it in and walk away. If you would rather buy it out, find a different one for less in the open market, or negotiate a realistic buy price on your car (if possible).

Yes, if the residual is too low, you can buy for less than it's worth, but you already paid for the extra depreciation (that didn't happen), so at best you are getting your money back.

To me, leasing makes sense when the subsidized programs (ie, the $260 Odyssey EX) are too good to pass up, or you want to own a luxury car, but only under warranty.

jlawrence01

I am not a great fan on consumer leasing in general. In many cases, I have seen people get, well, fleeced. On the other hand, I have seen some pretty good deals for those people who drive ONLY newer vehicles.

My issue (and why I advise many against leasing) is that like most financial transactions, if you don't understand what you are doing, you will get taken every time. You better understand the concept of the capitalized cost, the imputed interest rate, how to terminate the lease, and the costs that will be incurred at the termination of the lease.

The people who get killed only seem to know one thing - the monthly payment. They sign up for 12k mileage leases when they commute 15k miles a year.

stickguy

You are right that leasing is much more confusing to the average buyer, and that traditionally it has been much easier to pull what my be considered "sleight of hand" tricks to pad the bottom line (what was referred to above as fleecing).

Yes, people have to know what they are siging, but it is really easy to lose $$ on a lease contract, although maybe it got better with the regulations regarding disclosure (probably not if people still don't read).

That low payment really does suck you in, but at least with a lease, if the payment is comfortable and you can walk away at the end, you can't be too bad off (assuming you aren't way the heck over the mileage limit).

perna

But we pulled the trigger on the 36 month lease on the wife's Explorer. Reasons:

1. The depreciation on Explorers makes buying them suicide.

2. Wife wasn't in love with it, but we needed something big and reliable. Babies (more specifically, the items that must accompany babies) take up ridiculous amounts of space.

3. Ford was running a ridiculously cheap lease deal. Plus we got A-plan through her dad.

She is in love with the new Freestyles, so we *may* buy one of those instead of lease next time. The goal, really, is to find a car you love enough to drive until after it's long paid off. I'm 2 years into a 5 year Maxima loan, and unless financial hardship hits I plan on driving that car for the remainder of the decade (the downside to Maximas is they're somewhat expensive to insure). It was a 1.9% loan so the money's cheap, and what a great car. I really can't see how I'd be happier with anything else. I ride in friends' Camries, Accords, Impalas, SUVs, etc., and they all pale in comparison to the Nissan. I think I'm going to be one of those people who, in 30 years, has owned 3-4 Maximas.

jlawrence01

With a lease, you know roughly what your cost per mile of ownership is at the inception of the contract (assuming that you bring the car back in decent shape and all of that). There is no downside risk.

For tightwads like myself, there is little UPSIDE in a lease. If it is a great vehicle and is extremely reliable, you have to turn it in (or pay the contract amount which could be more than the vehicle is worth on the current market).

Of course, I am making several assumptions:

1) the individual can afford to make the payment throughout the term of ownership.
2) that the deal does not include a bunch of added mop & glo stuff etc.

I make a dozen buy vs. lease decisions on vehicles, office equipment, etc. each year. I have set up a couple of forms to help me evaluate which is a better deal. That tends to put off a lot of the salesmen who are pushing the leases. I tell them that without all of the information, they don't get the business. PERIOD.

turbotorque

That isn't exactly a newsflash. The same can be said for people who finance!

Volkswagen is currently offering lease deals with a money factor of nearly 0. In other words, the only thing you pay for is the car's depreciation, not interest. But unlike a 0% financing deal, the person who leases the VW won't be "buried" in 3 years time. If you like your car, exercise the purchase option. If you don't like it, dump it. If you're nervous about owning a German car with a turbo engine off warranty, exchange it for a new one.

All seems pretty straightforward to me.

In truth, if the issue is about what makes the most financial sense, everyone would be buying 3 to 4 year-old used Buick, and would drive it until the wheels fell off.

turbotorque

I think some of the people who are anti-leasing probably had a sour experience with it in the past. All you need to do is your homework. With the money factor and residual number at your fingertips, you can quickly strip away all leasing "hocus pocus" and negotiate a good vehicle selling price in the same way as if you were paying cash.

isellhondas

You are totally wrong about residual values. The residual is carefully calculated to insure the cars will bring that much later at auction.

In other words, the residual should be at or below the car's projected WHOLESALE value therefore making it a great value should the person leasing it decide to buy it at lease end.

Now, having said that, some car companies have made some horrible mistakes in the past. For today's sales, they have mortaged tomorrow by setting residuals that are too high in order to have attractive payments. When the people leasing them walked away at lease end, those cars brought THOUSANDS less at auction! Jeep did this and so did Audi and a couple of others.

Hopefully these car companies learned their lesson!

bobst

Hopefully, those companies have not learned their lesson. They the consumers can keep leasing cars for an unrealistic low price.

turbotorque

I was under the impression that many leasing companies buy insurance policies against the a decline in the residual value, which effectively locks in their exposure at the time the vehicle is leased. This is why many leasing companies refuse to negotiate the lease buyout price. At least this is what I've heard elsewhere.

Also, since you sell Hondas, hasn't Honda been a tad high on their residual values in the past? Those two year $260 month Odyssey leases quickly comes to mind.

isellhondas

Make Honda a good car company to lease from. High residuals equate to lower payments.

And, yes, a couple of times I can think of, Honda went a bit overboard and took some hits. I've never heard of any type of "insurance" against this.

stickguy

I think Terry has mentioned it in the past. But, for whatever reason, many lease companies won't negotiate (or if they will, you will have a heck of a time getting to someone that can do it).

danf1

The main bank that I use for leasing does purchase insurance for their residual values.
Because of this, they will not allow you to turn in your lease early even if it is paid in full. They require turn in within 30 days of lease maturity.

Rickster

I have a 2000 Passat that's starting to show its age (including rising maint. costs). My new job is around the corner so I'm barely driving 10 miles a day, but the car is the only option for getting there so reliability is key. Also, I tend to drive a lot of execs around so a newish car is sort of required.

Anyone think I'm way off base? I would appreciate your thoughts.

stickguy

Well, you sound as much like a candidate as anyone.

Kirstie_H

My opinion: Sure! You can probably get a nicer car for less money, especially if you would be taking a 60-month loan on a purchased vehicle. Plus, my own experience is that it's easier to negotiate the inclusion of maintenance items (e.g., oil changes) on a leased vehicle since they've got an interest in having the vehicle well maintained.

turbotorque

Now is as good a time as any to lease a new Passat. In November, VW was essentially offering a money factor of nearly zero on Passat leases. In other words, you have something like a zero percent financing deal, only you're free to turn in the vehicle in three years if you should so choose. The person taking the zero percent financing will likely still be upside down in three years.

And with your kind of mileage numbers, you should have a fairly high residual value, and an even lower monthly payment.

gbeer

Wanting to be thrifty, I again investigated buying a used car, but came up with the conclusion that it makes no sense to buy any car, unless you want a very used car, or unless you put on very high mileage every year.

It's getting time to turn in my 2nd leased Lexus GS300.

I drove an '01 LS430 at a dealer this weekend and was floored by how well it drove. My last LS Drive was the '90 LS400 that I sold in '96 after 120,000 mi. The difference is amazing- no wonder Car & Driver called it #1 over the other 5 $70,000 luxury cars.

Anyway, I got a lease quote from my local Santa Monica CA Lexus dealership (thru costco).
Quote on a 4 yr, 15,000 mi/yr Basic '05 LS was $709/ mo including 8.25% tax ($655 no tax) and $1,200 drive off (Lexus motor credit). I was told this was $1,200 over invoice. MSRP is about $56, 325. Residual is $27,775. I also priced the modern luxury package w/ keyless ent

Secondly, I originally was considering buying a used '01 or '02 LS for say $31,000- $34,000, even bidding on Ebay to get one from say Texas. These cars have very high residuals But according to my calculations, including depreciation, and $0 down, the monthly costs are pretty close, if not the same, not to mention the prospects of major service costs at 60-100,000 mi.

In addition after looking at the residuals, above, I think that based upon the asking prices of used '01's that the $27,775 residual may be lower than the car's value in 4 years and one could possibly make money selling a leased car.

If you consider buying a car that may depreciate alot, like an american car or an audi, then the prospect of loosing your *** with severe depreciation is daunting.

To me the essence of a lease vs purchasing is deferring the actual depreciation cost. The lease is a contract for depreciation and interest. At the end you get to see which way the lessor made a mistake. If the buy- out residual is higher than the market value, you turn in the car and think yourself lucky for having benefited by lower payments. If the buy- out residual is much lower than the market value, you can sell it to someone else and pocket the difference (I have done this, for about $1,500).

Question: Why would someone buy a new or a used luxury car with 45,000- 60,000 mi instead of leasing costs less or if the differnce is $50- $100/ month.

steine13

"Question: Why would someone buy a new or a used luxury car with 45,000- 60,000 mi instead of leasing costs less or if the differnce is $50- $100/ month."

Because it *often* costs less to buy than to lease. Because one would rather own a car and not have to ask permission to, please, be allowed to sell it. Sounds like in your case, leasing makes a lot more sense. Sometimes it's the other way round. There are no hard and fast rules.

BTW, I disagree about Audis depreciating badly. A8s do, A4s hold their values fairly well.

" If the buy- out residual is much lower than the market value, you can sell it to someone else and pocket the difference (I have done this, for about $1,500)."
Bully for you. It's great if you can do it, but I doubt it happens a lot. Another advantage of leasing, in most states, is sales tax, as you only pay on the depreciation. The final advantage is that if the car gets wrecked & fixed, which greatly diminishes the value, you just turn it in.

I don't like leasing myself, but I agree it's something to look at with high-end cars.
-Mathias

masonmi

I've been reading the message boards and had considered leasing but felt locked in for a 3 year term and having a residual value looming at the end of a lease seems overwhelming. I do like to change cars every 4 or 5 years, if I did a lease and did get a good lease payment, how would I know if I would get a good lease rate on the next car I get after turning one in from a previous lease? and would the residual value effect me when it would be time to choose a new car to lease?

steine13

Hi M,
You're down the street from me...

"how would I know if I would get a good lease rate on the next car I get after turning one in from a previous lease?"
You wouldn't. But at that point, you'd be free to buy lease, walk, or take the bus. Meaning, it's no different from owning in the sense that when the lease is up, you're free to get your next car. Downside with a lease is timing, it's sort of fixed, even though you can often trade a little early or even "extend" the lease a few months... not with all lenders, though.
The good news is you won't be upside down.

"...and would the residual value effect me when it would be time to choose a new car to lease?"
The residual value only matters if you decide to buy the car; you do have that option and you can decide to excercise it depending on how you liked the car, how reliable it was, whether it had been in an accident etc. It's not a bad option, sometimes. Some lenders will negotiate residual values, some (Honda, for one) will not. It's different than buying, but at the end of the day, not THAT different.

-Mathias

masonmi

Thanks for the info Mathias, I didnt think you could trade in early on a lease? unless there was a special lease pull ahead program that was offered.

billherrmann

Hypothetical case. A 68 year old man leases a luxary car for 3 years & puts down the minimum amount of $ [as recommended by most lease analysts]. Four months later, he becomes totally incapacitated through illness or death. Is there any option available to his spouse[who has no use for the vehicle] other than returning the vehicle to the Dealer ALONG WITH THE REMAINING
32 PAYMENTS?

kyfdx

She can sell it on the open market or wholesale it to a dealer.. Every car has a payoff amount, even a leased car.. She'll have to make up the difference between the payoff amount and what the dealer or private party will pay her. That might be more or less than the rest of the payments..

Other options:

1) If she drives, sell her other car and just drive the leased one..

2) Let the car sit... make the payment each month, then turn it in at the end.. Sometimes this is cheaper, even with insurance, taxes, etc, than trying to turn it in early..

She really isn't in any worse shape, than if her husband bought the car, and financed with no money down.. She would still have a load of negative equity if she had to get rid of it.. Although, owning the car would make a little simpler.

regards,
kyfdx

billherrmann

Thank you for the response kyfdx. since posting the question, I spoke to a Ford salesman who advised that Ford would allow the spouse of a deceased owner to simply return the car without any financial penalty[ or credit rating penalty ].I wonder if this info is correct & if other Manufacturers do the same.

boomer1b

A friend of mine leased a new Merc. this summer.
He passed away last month leaving his estate on the hook for ALL of the remaining lease payments !

His wife does not drive........

Not sure who he leased it thru........

His son is having a tough time disposing of the car...........Sad.......It sits in the driveway !

BTW: Salesfolks....Are there disability and/or death policies avail on a lease deal to pay it off?

danf1

You can purchase credit life and disability on lease contracts in Pennsylvania. I don't want to make a broad assumption for every state in the union as regulations vary from state to state.

corvette

>>> Let the car sit... <<<

If you're not driving the car, at all, you can probably drop collision coverage and leave comprehensive for flood/fire/theft. The lease company may require collision coverage, in which case you could lower the limits to the state mandated minimums. You may not have to register it if it's not being driven, but this may vary from state to state.

bodble2

A oouple of questions:

 

If you wreck the car (even if it's your fault), you can simply turn it in at the end of the lease, with no penalty? But if you've scratched the paint, or your kids have messed up the leather seats, then they could penalize you?

 

What if the car gets stolen?

 

Do you have to pay for regular maintenance, or is it included in the lease, or can it be negotiated?

kyfdx

1) If you wreck the car...it has to be fixed.. but, no penalty, if the work is done correctly.

 

2) Maintenance.. same as if you owned the vehicle.. you pay for it..

 

3) Stolen... most manufacturer lease programs include GAP insurance... this makes up for any difference between payoff and value (same for if it is totaled in an accident.

Kirstie_H

and some stuff CAN be negotiated. Our Pacifica didn't "include" regular maintenance, but we negotiated at least the oil changes.

kyfdx

yeah... you can negotiate babysitting in the deal, if you want.. but, everything has a price... comes out of one pocket or the other.. If you like everything included, that is one way to go....

bodble2

So, is it correct that they (manufacturer) will absorb diminished value if you wreck the car, but could charge you extra if the car is returned in a condition that, in their opinion, shows inadequate maintenance, ie. abnormal wear & tear? Somehow, you'd figure if they were going to recover on one, then they should do likewise on the other. I mean, if you drive recklessly and wreck the car, isn't that just as bad, if not worse, then if you don't give it reasonable care and maintennce?

bodble2

What is "money factor"? I assume it's the lease rate or interest rate. But there seems to be more to it then simply interest rate.

 

Also, when you lease, do you first negotiate the selling price just like you would if you were buying, and then calculate monthly payment?

kyfdx

Actually, turn in isn't bad... and I'll use Honda Finance as an example... They give a $1500 allowance for abnormal wear and tear..

 

Most captive finance companies are not out to leave a bad taste in your mouth, at the end of a lease.. I've never had any unreasonable charges, and I've done 4 leases.. including one turn-in, that had a $9000 accident repair.

kyfdx

Money factor is just a number that substitutes for the interest rate... and simplifies the calculation.. To get an equivalent interest rate, multiply the money factor by 2400..

 

i.e.: 0.0025 = 6.00%

 

Yes, you negotiate the purchase price, then calculate the payment.. Although, some dealers will use that process to obfuscate the specifics of the deal... It is always wise to know the base rate money factors and residuals going in... and what payment to expect at a certain price.. So, you don't get taken..

 

Sort of like knowing what your house payment should be at a certain interest rate... and what are normal closing costs..

 

regards,

kyfdx

bodble2

Thanks!

 

What typically would be considered "abnormal" wear and tear? Excessive scratches? Faded and chipped paint? Torn seats? Parking lot dings? That sort of things?

 

Do you always multiply money factor by 2400, or does it depend on the term of the lease? Can you give an example of an equation involving a money factor number. (I'm probably more at home with working with interest rates. Lease payments should be just a present value, or loan, amortization calculation).

 

Also, is it the exception, rather than the norm, to have zero down?

danf1

Excessive wear depends upon the lease company, but all that you described would fit the category as well as worn tires, chipped windshields, cigarette burns etc...

 

Multiplying the money factor by 2400 will work for any term. It isn't exact, but close enough.

 

You should put as little down as possible on a lease. Typically first payment, plate fees, and security deposit. Otherwise you are throwing away money.

 

Also make sure that your lease includes gap insurance, if not then buy it.

bodble2

Thanks. I am surprised though that worn tires would be considered abnormal wear and tear. After all, it's pretty hard to drive the car without wearing out the tires!

kyfdx

All of danf1's observations are good ones...

 

It really is worn-out tires that have to be replaced... Anything under 4/32" tread depth.. I once turned in a Pathfinder with 55K miles and the original tires passed inspection... And, my '01 Accord with 52K and original tires also passed...

 

If you do the typical 45K lease, and you don't have performance tires, you can usually get by..

 

regards,

kyfdx

tbavar1

Lease or Purchase?

 

I was quoted $57,600 on a new Lexus LS430 with a MSRP of $63,284.

 

The sales tax is 7.5%.

 

The residual is 60% with a money factor of .00205.

 

Mileage of 20,000/yr is included.

 

The monthly payments are 36 months @ $967.20/month which includes the New York sales tax..

 

A down payment of $2,596.37 is due up front which covers the first month.

 

This is vs. a loan at 4.9% for five years.

 

The loan is easy to figure but the lease is confusing.

 

Am I getting a fair shake on the lease and is it the best option for me?

 

Thanks,

 

Trevor

 

Bavar@bavar.com

stickguy

Well, the money factor is roughly equivelant to 4.9% too, so that part looks like a wash.

 

I'm not an expert, but a 60% residual on a 20k/yr. lease seems pretty stong. Also a nice discount on the slaes price, so that part looks good.

isellhondas

A 967.00/mo LEASE payment!

rroyce10

....... This is the part were you need to step back and ask yourself ~ "Am I buying a nice vehicle, or am I buying a nice payment" ...

 

             Leases can be nice if your in business or if you know your future may never change, because all your really doing is renting a vehicle, and you have to repeat the process in 3 years or less .. if you get transferred, you decide to move, get married, get divorced, get sick, get well, you kinda lose any options with a lease .. everything in a lease is negotiable ~ except the *residual*, and thats a non-moving entity, you can move towards it, but you can't make it go away - it's rental car ....

 

             In your case your looking at a LS430 .. great vehicles with a wonderful history of reliabilty, little or no service scenario's, and the resale value is extreme ..... so whats all that mean.? .. if you buy it, you can build equity and they are an easy vehicle to sell - Clean 3 year old 40k LS's will see all of $40 grand down Retail Rd, even clean high mileage LS's can find lots of buyers, can't say that about it's competitors .... so we are back to: are you buying a nice vehicle, or a nice payment ........ it's your dime.

 

                               Terry.

steine13

I don't think this is so easy to decide...

 

The cost of the lease is 35 months times the payment, + $2,600 bucks... but you have to back out the tax ($2,400 or so) and the interest ($7,200) and you have to figure the car won't be worth $40k at the end, cuz it has 60k miles and not 40k.

 

I did the math and came up with this: Buying the car for the established price and making the equivalent payments on a *purchase* rather than a lease; the balance after 36 months would be "around" $34,000. That includes the "extra" sales tax due when buying vs. leasing.

 

So the question is, what would you rather have, a 3-year-old (4-year-old to car dealers) LS 430 with 60k miles, or $34,000 in your pocket? Sounds to me like a toss-up, and the answer depends on personal preference as much as anything.

 

Me, personally, I'd take the money and buy a 2-year-old A8, plus a Camry to get around on the days/weeks whent he Audi is in the shop. Like I said, personal preference...

 

-Mathias

bodble2

leasing will almost always cost more than buying over any period of ownership. But if you can get a good lease deal with high residual, and low lease rate, you can minimize that cost difference. But with a lease, what you're paying the "extra" for are: less hassle if you want to drive a new car every 3 years or so; the insurance against diminished value if you crack up the car, or unexpected drop in the market value of the car; and the reduced stress because you're driving, as Terry said, essentially a rental car. It's someone else's car. I'm not saying you should be reckless with it, but lets face it, when it is "someone else's car", psychologically, you don't worry about it as much. And any "defects" or subpar workmanship won't bother you as much. It's just human nature.

 

What I don't get as why most people seem to think a leased car is more advantageous for business. I don't know about the US, but under Canadian tax laws, if you lease, you write off the lease expense, and if you buy, you write off depreciation. If the car is used both for business and pleasure, you pro-rate the claim whether you are leasing or buying. There is a cap on lease expense, just like there is for depreciation. The law is designed so that there is not appreciable tax advantage either way.