Another consideration is whether you have the cash for a down payment. If you don't, leasing may be the preferred option. In many cases, you may need only $1,000 or so to get started with a lease, even for fairly costly cars. The initial payment, when stripped to bare bones, will usually include the first month's payment and a bank fee. Most everything else can be rolled into the ongoing monthly payments. Should you want to get rid of the car prior to the stated termination date, there are online sites where you may be able to pass the lease on to someone else. That assumes the vehicle is desirable. This is not intended to mean that leasing is preferable to buying, but one must factor into the equation the issue of either trading in (easiest, but least lucrative) or selling independently (most annoying, but potentially more lucrative). For the latter, I've found that eBay is a worthwhile venue for getting more at the resale end. I have, however, been selling on eBay for 10 years and have some experience doing so. It may be a touch trickier for those who are new to the site.

I think financially speaking, it's almost always better to purchase than to lease. With a purchase, you have more freedom as to how many miles you can put on the car without paying a penalty.

Manveer,

I looked at your blog and your spreadsheet. While I agree that according to your numbers leasing is not cheaper overall than buying, the difference in monthly payments is huge at $930/month. Most people live in their month-to-month cash flow, and to understand why car shoppers often gravitate towards leasing, you need look no further than that reason.

Disclaimer: This is from a guy who buys pre-owned and holds vehicles until donated to a charitable cause.

Francisco is spot on. Leasing is almost never better than purchasing. If you decide you don't like the car and want something else, you will have to find someone to take over the lease, which is more difficult than finding someone to buy the car you purchased. In addition to limiting how many miles you can put on the car, the dealers can ding you for "wear and tear" when you turn the car in.

I've written a post on this, comparing buying vs. leasing with hard numbers:

http://www.drivevirtuallyfree.com/2009/06/why-leasing-seems-deceptively-cheaper/