Almost every vehicle owner at one time or another has considered the option of buying or leasing a new vehicle. There are several factors to consider in determining whether you are a good fit and whether it is financially beneficial, but the difficult task for a first time lessee is narrowing it down to what is the number one criteria when it comes to leasing, especially since current research shows that over 25% of all new cars rolling off the dealer lot are leased vehicles.

There are several indisputable reasons why leasing versus buying has its merits. Lower monthly payments, a selection of high-end models, minimal maintenance costs, the latest technology and enhanced safety features are all advantages that come with a new vehicle. However, despite all the positive features just mentioned, the deciding factor that should ultimately drive a decision according to a recent article by Jerry Reynolds, The Car Pro, to lease versus buy, is the number of miles the potential buyer anticipates driving the vehicle per year…17,500. According to him, that is the magic number, and it will certainly be a contentious topic for discussion in the car leasing industry. Anything less may not be practical depending on your use of the vehicle, and anything greater may end up costing you excessive fees.

If you expect to put down more than that, then you should consider buying the vehicle and forget about the lease. If you are a low mileage driver then leasing has its benefits. You must not lease for more than three years or exceed the factory warranty, ie 24 months or 24,000 miles; because during the lease term you do not anticipate any major mechanical or maintenance costs such as timing chain replacement, tire replacement, A/C repairs, transmission repair or major engine repairs… just regular maintenance such as required fluid changes, filter replacements, tire rotation, etc. If your lease exceeds the factory warranty, any mechanical repairs will be out of pocket. If you exceed the mileage allotted under the lease, you will be required to pay the excess mileage charge which can be as much as 25 cents per mile, depending on the terms of your lease.

If you decide to lease, please ignore the option to purchase the car at the end of the lease term, as you are clearly defeating your purpose in leasing a vehicle. Plus, you’ll end up paying considerably more for the car than if you had bought it outright. It is also in your best interest to lease from a dealer rather than any third party leasing company due to the availability of lower interest options from the factory. Another supporting reason is that third-party leasing companies tend to inflate their costs to get higher profit margins since they bought the vehicle from the dealer to begin with (as you are doing) and may also try to tempt you into considering a 3+ year lease term or exceeding the warranty.

Dealers have now made leasing so attractive with our current economy that if you are a back-to-back lessee, it will result in you coming back on the market for a new car every three years (or sooner, depending on the lease term), allowing the dealer to increase their purchase of inventory from the manufacturer. Current auto statistics indicate that the average car owner who purchased their vehicle has held onto it for 5 years or more, depending on the source they use, so one can understand the dealer’s impulse to lease by volume of inventory. Dealers would like to see you at their facility as often as possible.

If you decide to rent, please read the lease carefully, become fully familiar with the terminology, and make sure you fully understand your obligations. We’ve all heard horror stories at one point or another about leasing victims. Personally, I am not a fan of leasing as I enjoy the privilege of owning a car, but for many it may be their best option. If you know what you’re looking for and can negotiate wisely, then leasing may be a good option for you.