Buy vs. Lease
According to Edmunds.com about 70% of customers pay cash for their car or finance their purchase with a loan and about 30% lease. So, how do you decide to lease or buy?
The benefits of leasing are very simple: leasing allows you to drive a new car every two to three years at a lower payment, avoid the higher costs of ownership associated with owning an older vehicle and it gives you the option to own the car at the lease end term if there is equity, but walk away from the car if there is zero or negative equity.
The benefits of buying a car are simple as well: you get to enjoy the pride of ownership, you can modify the car as you want without breaking the lease terms and you will have more flexibility to sell the car when you want. Additionally if you were to keep a car over multiple lease cycles you will have equity in your car instead starting a new payment cycle.
Owning a car can be a great investment. If you take care of it, you may not need to buy another car for years, or perhaps be able to sell it for a good price when you opt for something new. Because there are no restrictions, you’ll be able to drive as much as you want. And you can customize your car with accessories, add-ons, paint and bumper stickers, or aftermarket performance enhancers.
WHO OWNS IT
The car is yours and only yours. You might pay for it with cash, or make payments under a financing plan. If you’re financing the car, your lender will require you to meet certain obligations, such as monthly payments or a down payment. Otherwise, you car can be repossessed.
Financing a car means the bank or lender will need an initial payment from you, which is usually calculated according to your credit score, among other factors. You may also choose to trade in your old vehicle, the value of which can be put towards your down payment.
While the value of a new car begins to depreciate as soon as you drive it off the lot, you may be able to sell your car for a fair price as long as you maintain it properly. It’s important to visit a factory-authorized service facility at regular maintenance intervals for this reason. However, even a car in bad shape may be sold for parts or scrap.
END OF PAYMENTS
You’ll have to pay a certain amount as stipulated in your contract, but once you’re done, that’s it. The institution you borrowed from will send you a Lien Release, which is proof that the vehicle belongs entirely to you and may not be repossessed for nonpayment. The vehicle is now yours.
Leasing a car is much cheaper than buying it outright, because you’re only paying a percentage of the total price. You won’t have to worry about fetching a good price or finding a buyer for it when you’re done, as the dealership will take it back from you. If you like to have the newest gadgets in your car, leasing may be your best bet, as you can regularly upgrade to drive the latest models. You may also be able to drive a fancier car than you could normally afford.
WHO OWNS IT
The institution through which you are leasing the car retains ownership. You’re essentially renting the vehicle. Your contract will state you’re using the car for a set amount of time in exchange for a set amount of money.
A lease doesn’t typically require a down payment, but you will have to provide the first month’s payment along with a security deposit, acquisition fee, and any other applicable costs. It’s possible to lower the amount of your monthly payments by increasing your initial fee.
Because you don’t own the car, you will turn it in to the leasing agency at the end of your lease. However, pay close attention to any mileage restrictions or wear and tear guidelines—excessive use may cost you extra when you return your vehicle.
END OF PAYMENTS
You usually just return the vehicle when your lease ends. However, you may be able to purchase it during or after the term of your lease, or trade it in before the term of your lease is over. If you think you might want to employ any of these options, ask your financing agent about them before the lease is signed.
BEST CARS TO LEASE
The amount you’ll pay for a lease is based on the amount of time you’ll have the car and the amount it will depreciate once you’ve driven it, so the cheapest leases are those for cars that will retain their value after the term of the lease is up. You can review lease ratings to see which cars will depreciate quickly and which cars will stay valuable.