Many factors must be taken into account when choosing financing options for new cars. The way a person drives and makes purchases are a couple of the factors, but financing incentives, interest rates and lease end values are important as well. The sum of the parts must be used to make an informed decision.

How You Drive

Start here. The decision may be easy if everything falls in one direction or the other. Every auto loan institution has several buying and leasing options to offer.

Knowing how far you drive, upcoming trips, new jobs or relocation, and everything else that will affect your yearly driving distance will have an effect of your choices. Match up your estimated miles with a plan that works.

If you'll probably go over the mileage limit on a lease, the decision is easy. If you probably won't, continue to the next factor.

How You Buy

It is ironic that as cars, trucks, and SUVs become more reliable and longer lasting, the trend is to change vehicles more often.

A lease can set you free. It can also tie you down. You can have your nice, shiny new car every 2-4 years that you want, but if you need to make a change earlier, it is more difficult than with a purchase (and even that is difficult sometimes).

Many lease programs in the 1980s and 1990s took criticism across he board because of huge final payments. Leases were often categorized as rip-offs.

The truth is that these programs, handled properly, allow consumers to stretch the quality of the vehicle in their payment range without stretch the payments. For example, a recent promotion by Mercury gives customers a $0 down, $268 a month purchase on their new Milans. It compares in payments to a purchase on a much less luxurious car, such as a Ford Focus or Chevrolet Cavalier.

A standard loan of 60 months on a $20,000 Milan would be over $400 per month. If a consumer wanted to purchase this Milan at Oklahoma City Ford Dealers but wanted low payments, they could take advantage of the lease special, then have the choice of turning it in at the end, trading it in, or taking out a loan for the balance, keeping the payments approximately the same.

It isn't the best way to buy a car, but for those who want to eat Filet Mignon for the price of a hamburger, this is one way to do it.

Finance Incentives

Incentives are designed to get you to buy or lease a vehicle. Some come from the manufacturer, while others come from the financing divisions of the auto maker. Buying or leasing a vehicle when the incentives are in your favor is one of the key factors in making the right decision.

The "tilt" will often be in one direction or the other. If they have enough leases out on the road, they may opt to improve purchasing incentives, or visa versa. Keep an eye on the needles to point you in the right direction.

Residual Values and Leasing or Purchasing Rates

To feel the pulse of a particular vehicle and know how it will depreciate, a customer simply has to check the residuals. The lease end value is a percentage assigned by the finance company to each vehicle that is an estimate of how much it will be worth when the lease is up.

Higher residuals means lower payments. It also means that the vehicle will probably be worth more than in 2-4 years than one with lower residuals.

Another factor is the rate. A higher rate with a higher residual shows less confidence in the lease end value than a lower rate.

To translate, the best leases are those with low rates and high residuals. This will yield the lowest possible payment on a vehicle through a lease.

Last Ditch Plea

Despite everything in this article which gives advice on purchasing or leasing a new car or truck, it is important to remember that low mile used cars are still usually the best way to go. Automotive classified sites like Memphis Used Cars offer excellent examples of how a 1 year-old vehicle with 10K miles is normally priced much lower than a brand new one.

Whether you chose to buy new or used as well as to lease or purchase, the best thing to do is be informed. Knowledge is power. Wield yours wisely.