The Morning Economic Report
5:30 am
Fri April 4, 2014

To Buy or to Lease - 4/4/14

To buy or to lease – that is the question that many prospective car purchasers are asking.  As indicated by a recent Wall Street Journal article, conventional wisdom holds that leasing an automobile is generally more favorable than purchasing one if you tend to upgrade to a new car every few years.  Purchasing makes more sense is you want to own for many years.  Leasing also doesn’t work as well for people who drive many miles per year. 

Also, leasing makes less sense if you are considering a brand that doesn’t retain its value particularly well.  That said, leasing has become more popular in recent years.  Last year, 26 percent of all new cars sold were leased, up from 22 percent a year earlier and 16 percent in 2003.  Leases accounted for 28 percent of new car sales during the first 2 months of 2014, putting them on track to rise for a 5th consecutive year.  

It may seem strange, by car manufacturers include leases in their sales figures.  Traditionally, leases have been more common with luxury brands.  At Mercedes, about half of new car sales take the form of leases, the largest share among major car manufacturers.  Lease payments are generally less than loan payments, which render luxury brands more affordable to a broader range of customers.