Leasing a Car VS Buying a Car

[SportyandMisty]

Here are a few articles that illuminate the issue:

Journal of Marketing Research
August 2007, Vol. 44, No. 3, pp. 490-502

To Lease or to Buy? A Structural Model of a Consumer's Vehicle and Contract Choice Decisions
Srabana Dasgupta, S. Siddarth, and Jorge Silva-Risso
https://doi.org/10.1509/jmkr.44.3.490

By treating leasing and financing contracts as differentiated products with their own unique acquisition costs, the authors develop a structural model of a consumer's choice of automobile and the related decision of whether to lease or buy it. They estimate the model on a data set of new car purchases from the entry-luxury segment of the U.S. automobile market. A key finding is that consumers are myopic and prefer contracts with lower payment streams even when they have higher total costs. The authors also find that consumers are more likely to lease than to finance cars with higher maintenance costs because this provides them with the option to return the car before maintenance costs become too high. The authors demonstrate how automobile manufacturers can use the model to evaluate the effectiveness of promotional incentives, such as cash rebates, interest rate subsidies, and increased residual values.

Economics of Automobile Leasing: The Call Option Value
STEPHEN E. MILLER
Version of Record online: 4 MAR 2005
DOI: 10.1111/j.1745-6606.1995.tb00045.x

Previous analyses of the automobile lease versus purchase decision have ignored the value of the call option embedded in closed-end leases with guaranteed buy back provisions. This paper shows that ignoring the value of this call option results in a bias against leasing in the lease versus purchase decision. Supporting evidence is provided by an empirical model of automobile lease rates.