A car lease and a car loan both involve monthly payments. However, with a lease another owner who retains the title to the car. With a loan, you own the car after you have paid off the loan. No option is better across the board, but one option will be best for your unique situation.

When to Elect a Car Lease

A car lease is best when you feel your needs for the car will change in the near future. It can take up to 7 years to pay off most car loans. If you want to replace the car within a few years, a lease makes sense. For example, if you are buying a sports car but know you will need a minivan when you have a child in two years, then a lease may make more sense. In many cases, the payments on the lease of a car can also be tax deductible, check with your tax preparer for more information.

When to Elect a Car Loan

A car loan allows you to build equity in an asset, and is a good option for those people who can invest in the asset long term. In the end, a car loan will leave you in a better financial situation than a car lease. However, it is a long-term investment, and cars do lose their value over time instead of growing in value. Also, car loan payments tend to be higher than lease payments.

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