Leasing verses Buying!!

It's like buying a new pair of shoes. Everyone has an opinion on the topic, but many opinions are not based on fact but fear or ignorance.  So, this page is designed to shed light on the REAL differences between Leasing and Buying.

Ownership
Leasing: You do not own the vehicle. You get to use it but you have to return it when your lease ends. If your lease vehicle has a purchase option, you may be able to purchase your vehicle during the term of the lease or at lease end.

Buying: You own the vehicle and you get to keep it when you pay off the amount owed under the financing contract.

The Bottom Line:  Most people NEVER own their vehicle.  On average, most people keep their vehicle for about 36-42 months.  Regardless of their finance term.  It's always smart to BUY things that apprecite in value.  Very few cars appreciate in value.  Ever.  When you lease, you pay for the portion you use.  And you ONLY pay taxes on the portion you use.  When you buy, you pay for the whole thing.  And you pay taxes on the whole enchalada!  Remember...wheather you lease or purchase...the only person who knows is you!  So "pride of ownership" should never be a determining factor.  Keep in mind that most of those "Fancy" "Luxury" cars you see on the road....are leased!

Up-front costs
Leasing: The money you pay before you take possession of the car may include the first month's payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and other fees, and other charges.

Buying: Up-front costs include the cash price or a down payment (if you finance), taxes, registration and other fees, and other charges.

The Bottom Line:  Typically, one can initiate a lease cheaper than a purchase.  Some "Subventive" Lease Payments (those advertised special lease payements) require Capitolized Cost Reduction.  Which basically just makes the monthly payment lower.  You need to determine which works best for you.

Monthly payments
Leasing: When you lease a car, you are paying only for the vehicle's depreciation during the lease term plus rent charges (like interest), taxes, and fees and charges that may be owed during the lease. This usually makes monthly lease payments lower than monthly loan or other finance contract payments.

Buying: When you finance your purchase, you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees. This means that you're probably going to end up spending more on a finance monthly payment than on a lease monthly payment.

The Bottom Line: Lease Payments are cheaper, however you will rarely have any equity at the end of the lease term.

Early termination
Leasing: You are responsible for any early termination charges if you end the lease early.

Buying: You are responsible for the remaining balance (plus prepayment penalties, if applicable) if you end the finance contract early.

The Bottom Line: Typically, ending a lease early or ending a finance contract early are very similar.

Vehicle return
Leasing: You may return the vehicle at lease-end and pay any end-of-lease costs.

Buying: When you've made all your payments, the car is yours. What you do with it is entirely up to you.

The Bottom Line:  There are two major differences between leasing and buying (financing) is that when you "return" a vehicle that has been leased, you can walk away from it.  Or, you can lease another New Vehicle, with a new car warranty, and all of the latest technology and features.  While you watch your friends, who financed their vehicle, continue to pay for something that has no warranty and is depreciating every day.

Future value
Leasing: The Leasing Company takes the risk of how much the vehicle will be worth when the lease ends. You will have to pay charges for exceeding the limits on mileage and wear and use as stated in your contract.

Buying: You take the risk of the vehicle's market value when you trade or sell it.

Bottom Line:  Think about all of the people who are driving large trucks and SUV's right now.  If they had leased, there would be light at the end of the tunnel.  Nuff said.

Mileage
Leasing: Most leases limit the number of miles you may drive (often 12,000-15,000 per year). Some Leasing Companys allow you to negotiate a higher mileage limit and pay a higher monthly payment. You will likely have to pay charges for exceeding the mileage limit in your contract if you return the vehicle.

Buying: You may drive as many miles as you want, but higher mileage will lower the vehicle's trade-in or resale value.

The Bottom Line:  No matter how many miles you drive, you will pay for excessive miles wheather you lease or buy.  If you lease, you will pay the "overage charge" as specified by the Leasing Company.  This is usually around .02 cents per mile.  If you attempt to get out of a purchase early, and if you have driven more than 12-15K per year, the Book Value will be reduced by around .32 Cents Per Mile!

Excessive wear
Leasing: Most leases define normal wear and use to the vehicle during the lease term. You may have to pay extra charges for exceeding those limits if you return the vehicle.

Buying: There are no limits or charges for excessive wear to the vehicle. But keep in mind that excessive wear will lower the vehicle's trade-in or resale value.

The Bottom Line:  Again, a lease or purchase have about the same end result here.

End of term
Leasing: At the end of the lease (typically 2-6 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.

Buying: At the end of the finance term (typically 4-6 years), you have no more monthly payments.

The Bottom Line:  The hard truth is most people always have a car payment.  If you lease, your monthly payment is typically lower.  And due to the shorter term of most leases, you are protected under Factory Warranty as you make those lease payments.  So you can drive More Car, at a Lower Payment, Protected with Factory Warranty (3 years/36K mi limit on most), and reduce the chance of paying for "things gone wrong" as the car ages...if you lease.