Why Buy? The Rise of Auto Leases

Why Buy? The Rise of Auto Leases

Are Americans falling in love with leasing?

It’s trending that way. After record-low statistics in 2009, the latest report from Experian Automotive found that leases made up 28.4% of all new-vehicle financing in Q4 2013—up 3.6% from the previous year—marking an all-time high since the company started releasing auto financing data eight years ago.

One explanation? On its face, leasing is cheaper than buying. According to Melinda Zabritski, Experian’s senior director of automotive credit, the average monthly payment for a new-car lease was $420—more than $50 less than the average new car loan payment. That’s significant savings, especially for those adhering to tight household budgets.

The increasing popularity of auto leases may also be due to less-stringent credit standards: The average credit score for an auto lessee dropped from 735 in 2012 to 719 in 2013, allowing more car shoppers additional flexibility when choosing the most favorable terms and rates—not to mention the option to drive a brand new car every few years.

RELATED: The Car Ownership Price Creep

Think you can’t afford not to lease? Before making a decision to buy or rent your next car, make sure to consider the big picture. Despite a cheaper monthly payment, a number of factors—exceeding your mileage limit, paying higher insurance premiums or coughing up wear-and-tear fees if you’re hard on your car, for instance—may result in spending more on your lease than if you'd purchased the car.

And here's another major consideration: You wouldn't have equity in the vehicle at the end of your lease—which is money you would have been able to funnel into a new down payment for your next vehicle.

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