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Should You Lease Or Buy Your Next Car? It May Affect Your Mortgage.

By
Real Estate Agent with Real Living 1st Choice Realty
Should you lease a new car, or should you buy one? Like most financial questions, the answer depends on your situation. For some people, leasing a car presents distinct economic advantages. For others, buying a car is the way to go. There's plenty of online material to help you choose your optimal path, but this 3-minute piece from NBC's The Today Show serves as an excellent summary. In it, you'll learn about the basics of leasing a car, and for whom leasing can be a great fit. You'll also hear reasons to avoid a lease completely. The NBC interview makes all of the following points :
  • Leasing allows you to drive a car that may be "too expensive" to purchase
  • Leasing puts you in a new car, with the latest safety features and gadgets, every few years
  • Buying a car means that you have no mileage limits, and can sell at any time
For many people, it concludes, buying a car is preferable to leasing one, with a notable exception being those people who can claim their car or truck as a tax deduction. Be sure to check with your tax advisor if you plan to take that route. However, for another group -- homeowners and active home buyers -- leasing a car can invite mortgage approval trouble. This is because a car lease payment is assumed by a mortgage underwriter to be a perpetual debt; one that never reduces or gets extinguished. When a lease is complete, it must be replaced with a new lease, and so on. Therefore, no matter how many payments remain in a lease, mortgage applicants must use the full car lease payment for purposes of a mortgage approval. By contrast, for people who are owners of their automobiles, car payments must only be added to debt ratios if more than 10 car payments remain until the car's loan is paid-in-full. For homeowners and buyers in Parkland and Coral Springs , this can improve debt-to-income ratios and support a higher purchase price on a home. There is no firm rule for whether it is better to lease a car or to own one. The arguments for both sides are compelling and reasonable. Start with the video, then do your own research. Click here to Search Parkland Homes Click here to Search Coral Springs Homes Click here to Find Out What your Home is Worth View my listings at http://www.jonklein.com

Comments (5)

Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Jon, this is great information on whether to buy or lease a car. It does depend on financial situation. Good for potential home buyers to know how one or the other might hamper their ability to get a mortgage loan.

Aug 13, 2012 11:26 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I've leased my real estate vehicles and now I buy them because many of the new bells/whistles do not interest me....the Parking Alert on my Lexus is a JOY!

Aug 13, 2012 11:36 PM
Rob D. Shepherd
RETIRED - Florence, OR
RETIRED

I will look at this later when I have more time. I ALWAYS thought leasing was bad, maybe not!

Aug 13, 2012 11:36 PM
Pat & Steve Pribisko
Keller Williams Greater Cleveland West - Westlake, OH

Great blog!  We must think  before we open our "pocketbooks."

Aug 13, 2012 11:39 PM
David Grbich
Realty One Group - www.FindCARealEstate.com - San Juan Capistrano, CA
Orange County Real Estate - 949-500-0484

Thanks for sharing - important to consider given that it may impact a housing move which is a much bigger financial consideration. Regards Dave

Aug 14, 2012 12:34 AM