I want a new (or gently used) car. Should I buy or lease?

In My Humble Opinion
1

In my adult life, I have bought several new and used cars. I have always used traditional financing to pay for them – including refinancing during the middle of the loan.

This summer, I am going to need to acquire a third vehicle. What I want is a 2013 For Fusion, loaded with various options. The total, according the Ford website, comes to about $25,000. I think I’ll be able to put about $5000 cash in. Beyond that down payment, the budget is tight, so I want the lowest reasonable monthly payment. Just using the Ford website, I can lease the vehicle for $211/mo. for 36 months or $353/mo for 60 months traditional financing (4% APR). I chose 4% because I just refinanced our other car and the rate they gave me was 3.91% for 36 months. This was to finance only $10K, so it may not be comparable. Our credit score is right around 460 – not great, but not horrible.

I sure like that lease payment better, but I figure something bad happens at the end of 36 months – like they want their car back. What happens then? If I refinance the car at 36 months, am I financing a smaller number, or am I back to the original $25K? I’m thinking that I should go with the lease because I need to get the car now, but don’t have a lot of room in the budget to add a new car payment. In 36 months, that other car will be paid off and I can morph that payment into the payment for the Fusion and still come out ahead.

What experiences do the Teeming Millions have with leasing and/or financing cars?

2

Leasing a car generally isn’t the best financial move, but it can make sense if A) you don’t drive a lot [12,000 miles per year is a common limit], and B) You want more car than you can afford to buy and/or you like to drive newer vehicles and trade them frequently.

At the end of the lease generally you turn in your keys, but sometimes (usually) you are given the option to buy the car for what the current value is. Calling it “something bad” seems harsh, because that’s why the lease payments are so much lower, at the end they have a still newish car (3 years old and low mileage thanks to the restrictions), while at the end of the payments for a purchase they have nothing. Leasing then buying might make sense if you can live with lease restrictions and will have more money later on (or you can probably get a loan for the purchase price if you buy the vehicle from the leasing company), but will be more expensive and more hassle than just buying it initially