Labor Day car sales: Should you buy or lease a new car?

New car sales are red hot in 2013.

And almost 25 percent of new cars now being leased – that's the greatest proportion since the 2008 recession all but ended leasing for several years.

But, when does it make sense to lease? And when should you stick with a purchase?

Reasons to Lease

The average new car now costs more than $30,000.

That makes the average loan payment now $464 a month, according to MSN Money . And, for many potential car buyers, that's a deal breaker.

As a result, leasing is back in a big way. You can get the same car for a lower monthly payment if you lease. If it's a car with great residual value after 3 years (the Honda Civic, for example), your lease payment could be half a purchase payment.

The car buying site Edmunds.com says you could be a good candidate for leasing:

  • if you are just starting out, and have no money for a down payment for a new car.  If the choice is a brand new Chevy Spark or a 12-year-old clunker, most of us would choose the new car.
  • you can afford a new car every four years. Then, if you lease, you just turn it in and start over again with new-car smell every four years.
  • you drive less than 10,000 miles per year. Leasing rewards low mileage drivers, just as it penalizes high mileage drivers (more below).
  • you always want to be covered by a full warranty. Now, a basic car repair costs $600 or more, so this can be a real budget saver if you have a breakdown-prone car.

Reasons To Purchase

But, there are times when it doesn't pay to lease.

Edmunds.com says you should purchase a car if:

  • you expect to go over the 10,000 or 12,000 annual mileage limit. Exceed the preset limits, and you will pay dearly, because the car will be worth less to the dealer at trade-in time. 
  • you haul a lot of stuff (artwork, crafts, dogs) and may dent and ding up the car. The fees are high at lease trade-in time to fix anything that you messed up.
  • you want to make any modifications to it, like decals, a spoiler, or a really cool exhaust system.
  • you are hoping to build up a down payment for your next car. If you lease, it's hard to save up.

If you do decide to lease, you can try to haggle on the price. And, make sure that you take that sometimes hefty up-front fee, divide it, and add it to that low monthly payment a lot of companies advertise.

Remember: While leasing will typically get you into a more expensive car than you could afford to buy, you have nothing to show for it at the end of the lease.

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