When it comes to buying or leasing a car the options can be confusing. To help you make an informed decision we have provided the information below. We hope you find it informative and useful.
Leases and purchase loans are just different methods of automobile financing. Leasing is not renting the vehicle like many people think. It is simply paying for the portion of the vehicle you "use" during the time you are driving it, where purchase financing pays for the whole vehicle, both of these have their advantages. When considering 'lease or buy' comparisons you should also look at what's important to you. Do you prefer to have a newer vehicle every two or three years with no major repair risk? Or would you rather pay more for longer with the possibility of being debt-free at the end? Do you normally keep a vehicle for a very long time or do you tend to get a new one two to four years anyway? Do you anticipate you or your families vehicle needs changing in the next couple of years? These are all things to consider.
Traditionally leases are based on term, mileage and residual (estimated vehicle value at the end of the term). The payments are made up of depreciation charge and finance charge, where purchase loans are comprised of principle charge and finance charge. One other thing to consider, a car's value depreciates the same if it's leased or purchased the difference is if it is a lease you are not responsible for selling it at the end of the term the finance company is!
Buying
Who Owns It
Whether you pay for the car with cash, or finance it and make monthly payments, either way it’s yours. Of course, if you’re financing it, you’ll have to meet the obligations the lender requires, like a certain down payment amount and timely monthly payments. If you don’t, they have the right to repossess it.
Up-front Costs
If you’re financing it, the bank will probably request a down payment. You can also trade-in another vehicle and use any equity towards your down payment. The amount of the down payment is usually based on the lender’s requirements and your credit score.
Future Value
Your vehicle will be worth whatever you can sell it for in the future and that depends on how well you maintain it. (Be smart and protect your investment with regular scheduled maintenance by a factory-authorized facility!)
End of Payments
Once you’ve paid off what you owe on your contract, that’s it. Your vehicle is 100% yours. The lending institution will send you a Lien Release as proof that the vehicle is completely paid off and all yours.
Leasing
Who Owns It
You do not own the car when you lease. You’re paying for the use of the vehicle, but the finance institution that you leased it through actually owns it. This is usually why you pay less per month in a lease than if you were to buy the car. .
Up-front Costs
Leases often do not require any type of a down payment. All you usually have to pay is the first month’s payment, a security deposit, the acquisition fee and other fees and taxes. But, as with a purchase, if you want to lower your monthly payments you can always pay more upfront.
Future Value
In most leases you don’t end up owning it so you don’t end up selling it. That’s the financial institution’s job. Although you may have mileage limits and wear and tear guidelines that, if you exceed them, could cost you extra money when you turn your vehicle back in.
End of Payments
Most people return the vehicle at the end of the lease term. But some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork and we’ll make sure you have your lease set up the way you want it.
Best Cars to Lease
The best cars to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less. This is a moving target that changes constantly over time. While your residual or end value of your leased vehicle does not usually change once you have signed the lease the new lease programs are changing as the market does. Look and see what new vehicles the Manufacturer is supporting or featuring for a lease as these vehicles are usually among the best cars to lease.
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