Thursday | May 24, 2012
Leasing or Buying: Which One Is Right for You?
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By
Tony Ku
11 March 2004
Lease or buy? It’s a decision that many college students have to make each year when they venture into the world of car shopping. But which should you choose and why is it a better idea?
According to James Wates, sales manager at Big Two Toyota in Mesa, Ariz., financing is not the best idea for most students. However, the best choice may depend on whether you have developed a solid credit history.
"Most students are first-time buyers and don’t qualify for financing because they haven’t yet established credit," Wates said.
The main difference between leasing and financing is that under the leasing option, a student can choose to either keep the car or return it at the end of the lease term. On the other hand, financing requires a student to take full possession of the car and ultimately pay for the entire vehicle.
Sara Thorson, an Arizona State University junior, decided against leasing when she purchased her 2001 Toyota Corolla almost a year ago.
"I wanted to be able to keep the car after I had been paying for it for the entire time," she said. "With a reliable car, it was more worth it to finance than to lease it."
While Wates agrees that financing does establish good credit for first-time buyers with no credit, he said leasing is often a better option.
"One advantage to leasing is that you don’t have to invest in the long term," he said. "Most students don’t know what they want or need yet and so leasing works really well for them."
However, for persons that do want to finance and do not have any credit, Wates said that Toyota and other dealerships offer programs allowing students to qualify for credit they haven’t yet earned. Under the program, the dealership assumes that recent graduates haven’t had the opportunity to build their credit.
One student looking to purchase a new vehicle using the leasing option is Mike Ferraresi, a junior at Arizona State University.
"For the kind of money I am willing to spend per month, it seems like a lease would be the right move to make," he said.
Ferraresi, who is looking to purchase either a sedan or an SUV, said financing would cost too much for him, especially coming out of college, but that leasing seemed more attractive.
"My biggest concern with financing is that I’d have to pay [higher] interest costs and [end up] paying more than I have to pay," he said. "Leasing is definitely an option."
© 2008, Young Money Media, LLC. All rights reserved.
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