Choice between leasing and buying depends largely on the buyer's priorities
To lease, or to buy: that is the question—and one often fraught with numbers, terminologies, and confusion. What's the correct answer? There isn't one, since the choice to lease or buy depends on a list of pros and cons based on needs, lifestyles and priorities.
There's no single solution to the lease vs buy conundrum that's always correct, though it does help to understand two principles. First, as part of the process of depreciation, vehicles wear out a little bit, every time you drive them-- with added miles and wear reducing its value over time.
Second, your vehicle has a finite lifespan as your vehicle. At the end of this life-span, you'll get rid of it, in exchange for an amount of money, called the residual value.
The sticky? Your ride is constantly being depreciated to its current residual value. In matters of leasing versus buying, where you stand to benefit or lose at the hands of these two concepts, is variable.
Purchase a car outright, and it's all yours, and you can freely rack up mileage, modify, and use the vehicle, as you please. You'll fork over an amount of money comprised of the purchase price if you pay cash, or any fees and a down payment if you finance. You own the car, you'll pay for repairs and replacement parts as it ages, and one day, you'll sell or trade it in, for its residual value.
Lease a car, and you'll make your first monthly payment up front, as well as covering any fees and a down payment. The lease is set for a certain pre-defined time period, called the term, during which you'll make these payments. At the end of the term, the leasing company gets the residual value of the vehicle when you either buy it out, or give it back.
Damage and wear to paint, tires and the interior of a leased vehicle, beyond an expected norm, can result in added charges at the end of the term. The residual cost, (but not the added wear-related costs), are laid out at the lease's onset. So is a mileage limit. Exceed it, and you'll be charged extra at the end of the lease, too.
As such, usually, monthly lease payments are lower, because you're basically paying the leasing company for the use of a vehicle which they own. As such, leasing amounts to a long-term car-rental plan: you wind up with use of a new vehicle for time, but you've got to give it back, or buy it, when you're finished.
So: lease or buy. Which is better? The answer is `it depends'. If you're a higher mileage driver keen on pride of ownership and you can foot a higher monthly payment, buying might be the best option.
If you're a lower-mileage driver, seeking lower payments, or if you enjoy being in a newer ride that's replaced every few years, leasing may make more sense.