Car buyers have several choices when it comes to buying or leasing a new car. Which option makes the most sense? Forbes.com's Scott Reeves says it all depends on your needs, preferances and finances.
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updated 12/2/2004 7:13:06 AM ET 2004-12-02T12:13:06

For many new car shoppers, the basic question is: buy or lease?

There are advantages and disadvantages to each so the answer includes two classic weasel words, “It depends.”

But after penciling out the expenses, the words aren't so weasely because making the right decision depends on your needs, preferences and finances. In short, there is no single right answer. The decision to buy or lease a new car should be based on an accurate assessment of exactly what you want and how you will pay for it.

Here's the starting point in your calculations: If you prefer to drive a new car every two or three years and if you want lower monthly payments, consider leasing. However, the zero percent financing that many manufacturers now offer to qualified buyers is tempting. So, if you plan to hold on to the car for five or ten years and if you like the idea of having no payments after the loan has been paid off, buy the car.

The fundamental distinction between buying and leasing is simple: If you buy a car, you own it when the loan is paid off but if you lease, you're contracting to use it for a specified period and you own nothing. Buyers have trade-in value for the next car purchase but those who lease have nothing at the end of the contract.

In general, lease-to-buy is more expensive than buying the vehicle because it extends the payments on what's getting to be an older car by the time you own it.

The major automakers, including General Motors, Ford, Honda and Toyota, have sales and leasing departments. As always, shop around and unless your heart is set on a particular model, play one off against the other.

© 2012 Forbes.com

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