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Should You Lease or Buy?

By Diane Wightman, CPA

Are you thinking about leasing furniture or small appliances rather than buying? When you lease, you borrow money from the seller and make monthly payments on the loan until it is paid off. The monthly payments on a lease are usually lower than if you financed your purchase.

Before You Lease

  • Decide if you will keep the item, say a television, at the end of the lease, or return it. If you want to keep the item for more than three years, it’s better to purchase rather than lease. There may be an option in the lease allowing you to buy at the end of the lease, so be sure to ask.
  • Add ucp your total cost. To figure out how much your total lease will cost, multiply the monthly payment times the number of months you are leasing. For example $150 per month x 36 months (for a three-year lease) means that you will be paying a total of $5,400 for the item you are leasing. How much would it cost you if you bought the item? Is it worth the extra cost?

Benefits of Leasing

  • Often, there is no down payment when you lease.
  • If you lease, you have a higher-priced, newer model than you would be able to afford.
  • You always have the newest model usually covered by the manufacturer’s warranty.
  • Leasing helps to establish credit.

Disadvantages of Leasing

  • Once you get into the leasing habit, it is hard to save for a new purchase.
  • Penalties are charged for excessive wear and tear when you return a leased item.
  • If you need to end a lease before it expires, you may have to pay early-termination fees and penalties.
  • After making monthly payments, you don’t own anything.

Other Options

  • Purchase the item at a garage sale or from Craigslist.
  • Purchase a used model.
  • Purchase a discontinued model.

Be aware that arranging a lease can be confusing and complicated. Take the time to calculate total cost to purchase and total cost to lease. Compare the totals before you make your decision. Take your time, and read all documents before signing anything. READ THE SMALL PRINT!

Use these tables to calculate the cost to lease an item versus buying. Remember; when you lease you don’t own the item at the end of the lease.
Item Leased Cost Per Month  Number of Months Leasing  Total Cost at End of Lease 

If you’re purchasing an item on time, meaning you pay interest too, calculate your total cost and see how it compares to leasing. Remember, you do own the item when it’s paid off.

Item Leased Payment Per Month  Number of Months to Pay Total Cost 


Diane Wightman, CPA, is a member of the COCPA Financial Literacy Committee and is owner of Controlled Resources Inc.