A reader recently asked me one of the most basic personal finance questions: Is it better to buy or lease a car? Easy one, right? Buying a car and keeping it for a long time is the choice of frugal people everywhere.

But the real-life experience of drivers shows there’s room for both owning and leasing. Business owners and contractors may be able to deduct some or all of their vehicle lease payments on their taxes. Some people like getting a new car every few years, and they’re willing and able to pay for it via lease payments. To find out more about the benefits of buying and leasing, check out a recent discussion on my Facebook personal finance page.

A few points worth noting from that conversation:

  • Leasing is a poor choice if you do a lot of driving and are at risk of incurring penalties for going over the allotted number of kilometres on your lease. Another risk is that your leased vehicle could be damaged or badly worn enough at the end of your lease term that it incurs repair charges.
  • Leasing over and over means perpetual monthly payments, but your car is always or mostly under warranty; this limits your maintenance bills to just oil changes and inspections or tune-ups.
  • If you lease a car used to generate business income, you’ll need to keep careful track of your mileage and the purpose of your trips – business or personal. You can deduct expenses for business use, but not personal. Here’s some information to help you decide whether to buy or lease a vehicle you’ll use for business.

The top choice of frugal-minded car owners: Buy lightly used cars, preferably with cash, to minimize the impact of depreciation, and then hang onto them as long as you can.

The Globe and Mail, July 4, 2019