Should I Buy or Lease a Car?
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
One of the questions many people ask when it comes to cars is “What is better: buying or leasing?” The answer depends on a number of factors.
When you lease a car, you get the use of it for a mere 24 months or so. Then, you turn it back in and get another. Although you always have sparkling new vehicles, you also always have a monthly payment. Don’t you ever want to shed that burden?
If you do, consider buying a high-quality car that meets your needs and purchasing an extended warranty along with it. Research the best way to negotiate the price for the car, warranty, and add-ons. Get the car serviced and cleaned regularly. You will have a new-looking vehicle for at least 10 years or more, and your payments may stop after only five years, depending on how much you pay each month on the loan.
For an even better deal, get the vehicle slightly used. You may even have the option to buy the dealer’s loaner or demo vehicle. If you can do this, you will know the car’s history without needing to research it.
Is buying also better than leasing when it comes to your taxes?
For tax purposes, if you must have a high-end car that isn’t a gas-guzzling tank (over 6,000 pounds), you’re better off leasing. You get to claim a deduction for the business percentage of the whole cost of the lease, insurance, license fees, fuel, car washes, etc. If your lease fees are more than $700 per month, for example, you can receive a substantial deduction—more than $8,000 per year—if you use the car primarily for business.
If you buy the same car new instead of leasing it, your deduction related to the purchase price would be limited to the depreciation on the car plus the interest expense on the payment if you are self-employed. Using bonus depreciation (because the car is brand new), your first year’s depreciation could be as high as $11,160, but it will substantially drop in the second year to $5,100, $3,050 in the third year, and then $1,875 forevermore. The lease would allow a consistent deduction of $8,000 or more, year after year.
I have had my Infiniti G20 for nearly 20 years. It was a dealer loaner. With the extended warranty, I got bumper-to-bumper dealer service for 10 years (or 100,000 miles) along with free loaner cars and first-class treatment. Due to Infiniti’s policy about free loaner cars, I continue to get the free loaners even though the extended warranty has expired.
Despite the tax implications, however, you should try to buy your vehicle if you can. Buy a quality vehicle and treat it well—in the long run, you will save cash and enjoy a great value.
Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.