Lease or buy? Five questions can help you decide

Car keys on loan application

Ready to decide if leasing is for you? Answer these five questions and you'll have a good idea of whether you should buy or lease.

Question 1. How do you feel about "owning" a car?

Some consumers get a great deal of satisfaction from owning something. Paying off the loan and getting the "pink slip" is a goal they strive for every time they make a monthly payment. If so, you won't find leasing to be nearly as rewarding.

Leasing is for consumers who don't care about that, consider car payments as inevitable as death and taxes, and don't care if they're writing a monthly check until they die.

Question 2. Do you drive more than 12,000 miles a year?

Most lease agreements allow you to drive up to 12,000 miles a year, maybe 15,000 in some cases. If you drive more than that, you could wind up paying some serious penalties -- at least 12 cents a mile and often 25 cents a mile or more for luxury cars and trucks.

If you know you'll drive more than that, you can ask the dealer to increase the allowable mileage to just about any distance you want. But you'll pay more per month.

So be realistic. Nothing is worse than having to curtail your driving, or even park your car the last few months of a lease, just because you're going over your miles. If you're going to put more than 15,000 miles a year on a car, leasing is probably not the way to go.

Question 3. Do you take good care of your cars?

Do you get the oil changed every 5,000 miles, regularly vacuum the interior and head for the body shop when a hit-and-run driver whacks your bumper in the grocery store parking lot? Or do you tend to forget about the oil, not worry about stuff like ketchup stains on the floor mats and ignore the inevitable dents and dings of daily driving?

When you lease a car it belongs to someone else, and they want it back in good shape at the end of the lease period. If you've neglected routine maintenance (keep your receipts), failed to repair crumpled fenders and scratched up doors, or allowed the interior to suffer excessive wear-and-tear, you'll be charged extra.

That can be a nasty, multi-thousand dollar surprise and negate any financial benefits of leasing. So if you take good care of your cars, you can buy or lease. But if you don't, avoid leasing.

Question 4. Do you have to have a new car every couple of years?

If you're content with an older car and want to drive it until the wheels fall off, buying can dramatically reduce your transportation costs.

Leasing makes more sense if you value the latest designs and technology, are concerned about the image your car conveys, and want the thrill of better-than-average performance, luxury or comfort.

Since monthly payments are usually lower when you lease than when you buy, leasing allows you to drive a more expensive car than you could probably afford to buy. And if you're only going to keep a car a couple of years, it's also the best financial decision.

Question 5. Do you have to have exactly the car you want, exactly like you want it?

If you'd be happy with any of several different models. If you're not picky about color or options like leather seats and upgraded sound systems. If you're willing to buy a car or truck that's already on the dealer's lot, that flexibility will allow you to negotiate the best possible price. Doing so is a bigger advantage if you're buying rather than leasing.

If, on the other hand, your heart is set on a single model, a favorite color and a list of specific options, you will probably have to order your car from the factory. You'll pay more for that and leasing becomes a better option.