Buying Vs. Leasing
Is Leasing the Right Option For You?
First, understand your life variables. Such as, marriage, divorce, a new job, loss of a job, expecting a child or expanding your family, your lifestyle, and your commute to work. Once you understand how your lifestyle or changes have affected your buying decisions, you can then decide if you should lease or not.
For you the buyer, your main intent is to keep your vehicle and pay it off. Ask yourself these 5 questions:
- How long have you owned your vehicle you have now? Did you put cash down? If so, how much?
- How long did you own the vehicle before this one? The one before that? This will establish how you purchase vehicles.
- How many miles a year do you drive?
- How much maintenance have you done on your vehicles?
- What kind of fuel mileage are you currently getting?
|Ownership||You pay cash for the vehicle. This includes price, tax, registration, doc fees, plus any added accessories you want. You then owe the bank until you pay off the loan in full.||You make payments to the bank for the term of the contract. You then have choices on the residual. This includes, purchasing the vehicle, trading the vehicle & paying off the bank, selling the vehicle & paying off the bank, or giving it back to the bank. If you give it back to the bank, there is usually a small fee.|
|Up-front costs||This could include cash down, taxes, registration, or doc fees.||This typically includes the first months payment, tax on that payment, a refundable security deposit (not all banks require a security deposit), registration, and doc fees.|
|Monthly payments||Loan payments are usually higher than lease payments because you're paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.||Lease payments are almost always lower than loan payments because you're paying only for the vehicle's depreciation during the lease term, plus interest charges (called rent charges), taxes, and fees.|
|Early termination||You can sell or trade the vehicle at any time, but you must pay off the bank to transfer the title.||You can sell or trade the vehicle at any time, but you must pay off the bank to transfer the title.|
|Vehicle return||You owe the bank until the contract is paid in full.||You owe the bank until the term is up. You then have the choice to buy it, sell it/pay off the bank, trade it/pay off the bank or give the car back to the bank. Giving the car back is called lease termination. You and the bank can communicate that when you are nearing the end of your lease. The bank will arrange for an inspection of the vehicle, and you can drop the car off at your nearest dealer.|
|Future value||Every car depreciates, some more than others. This is based on the market and the condition of the vehicle. What you owe on the vehicle is different than the value.||Every car depreciates, some more than others. This is based on the market and the condition of the vehicle. What you owe on the vehicle is different than the value. Remember, you have choices at the end of the term. This is when you book the car out and evaluate if you should buy, trade, sell, or give back to the bank.|
|Mileage||You're free to drive as many miles as you want, but the higher the miles, the more it will affect the value of the vehicle.||Most leases limit the number of miles you may drive, often 12,000 to 15,000 per year. You can also buy miles upfront on the lease. If you exceed your limits, you’ll have to pay the charges.|
|Excessive wear and tear||This will affect the value of the vehicle. It will then only affect you the buyer if you trade or sell the vehicle.||This will affect the value of the vehicle. It will only affect you if you trade, sell, or give the car back to the bank at the end of the term. If you give the car back to the bank, they will charge you for excessive wear and tear.|
|End of term||At the end of the loan term, and you have paid the bank in full, they will then send you the title to your car and you’ll then have full ownership of the vehicle.||At the end of the term, you have four choices. Buy, sell/pay off the residual, trade/pay off the residual, or give it back to the bank (lease termination) and pay the disposition fee.|