You need to know the difference between leasing and purchasing a car.

The bottom-line on buying:Cars represent a classic example a depreciating assets. Your car’s value drops 20% every time you drive it off the lot. However, purchasing is generally cheaper than leasing long term. You still get a car you love after you pay off your loan. This video compares the cost of a Jeep Grand Cherokee.

You’ll have more freedom and flexibility if the car you buy is yours. It can be used for any purpose you like, including to drive over an annual limit or keep it in excellent condition. Additionally, your monthly auto loan payment will be completely paid and you won’t have any car payments to make until you purchase another vehicle.

The bottom-line on leasing is Leasing can be more affordable upfront than buying a car. Leasing may be the best option for you if you have been looking at luxury cars that are out of your budget. These perks are subject to restrictions. If the vehicle is not in perfect condition, or you drive beyond your annual mileage allowance, fees will be assessed.

Leasing tends not to be cheaper in the long-term. But there is one scenario in which leasing cars can be cost effective: Cars rented for business can be deducted from your taxes.

One more option: Leasing to buy. This means you’ll purchase the car based upon its residual value (or what the dealer thinks it’s worth now). Before you jump the gun, it’s worth comparing the residual value your dealer offers you with the car’s objective value. These can be done through tools such Edmunds’ True market Value tool. If you are not satisfied with the price offered to purchase your car but still wish to keep it, this option may be a good choice.