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What else should people consider?

Time is of the essence, and distance: Are you a cross-country tripper who’s going to own old Betty for the next decade or are you a day tripper who’ll want to trade her in for a new model? These are crucial factors. If you’re going long distances over the long term, buying is the far better option. Cars are reliable work horses these days.

Plus, go beyond about 12,000 miles on a leased vehicle and you could end up facing hefty fees. Ranging anywhere from 5 to 20 cents per mile, those penalties can add up quickly. Say you drive 3,000 miles more than your lease allows, and you’re charged 20 cents per mile. When you turn your car in for a new lease, you’ll have to pay an extra $1,800 on top of any other fees.

It comes down to crunching the numbers. If leasing works the best for you, start by figuring out how many miles you want to drive each year, how long a lease you want and how much you want to put down. Then do some comparison shopping. Call a few different dealers and ask them to quote you a monthly payment.

Again, a used car is the most practical way to go. Now this may seem strange, but a used car could cost more upfront!

Really? Why would that be?

Used car loans are defaulted on more frequently, so you could be asked to put 10 to 20% down instead of ZERO to 10% on a new car. The good news is that a car loan can be easier to qualify for because the collateral isn’t going anywhere.

Safe driving to everyone on the road today!

Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS News.

License to Drive: To Lease or to Own  was originally published on

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