Facts About Leasing vs. Buying
By Brian Paul
Facts About Leasing vs. Buying and Their Benefits
Choosing whether to lease a car or buy a car comes down to informing yourself about what each option entails, and asking yourself a few questions about your financial needs, your lifestyle, and preferences. Truth is, there’s no right or wrong answer to questions like: “Do I want to drive a new car every two to three years?” or “Do I want to pay lower monthly payments in exchange for not having any ownership in the vehicle?”
But before you weigh-in on whether to lease a car or buy a car, here are a few facts you should familiarize yourself with before ever stepping foot into a dealership:
Fact #1: There is a selling price whether you buy or lease your next car. You can negotiate the selling price even if you are planning to lease, just as you would if you were planning to buy.
Fact#2: If you were to put the same exact amount of money down on a leased car and on a financed car, the lease payment would typically be lower than financing. This is one of the biggest draws of leasing — you can get more car for your money. With a lease payment, you’re only paying for the car’s depreciation during the term of your lease, whereas with a loan payment, you’re paying for the entire purchase price of the car. Contact one of our Sales Professionals and they will be glad to get you the best price on the vehicle
Fact #3: If you own your own business, and the car you are considering will be used for business purposes, you can write-off most, if not all of the payments by leasing. If you buy, you can only write-off a portion of the depreciation or take the mileage deduction. We recommend you consult with your tax professional about the write-off.
Fact #4: A car lease will have an annual mileage cap. The norm is between 12,000-15,000 miles. Once you go over the specified mileage on your leasing contract, you will incur mileage charges. If you think you will go over the mileage cap, we recommend that you pre-pay for the additional miles at the time of signing, because it’s typically cheaper to pre-pay rather than to pay at the end of the lease. When you buy, there are no rules on mileage, the car is yours to drive as little or as much as you like.
Fact #5: There’s less commitment when you buy than when you lease a car. When you buy, you can drive the car till the wheels fall off, or you can sell it or trade it in at any time and pay off the remainder of your loan. With a car lease, if you end your lease before the term is up, you will incur costly early termination fees. However, if you’re determined to get out of your car lease for one reason or another, services like Lease Trader.com and Swapalease.com can be a practical solution. With these services, you will lose the money you put down, but you can transfer the monthly payments to someone looking for an affordable way to get into a car lease.
Fact #6: Most leased cars are under warranty for the duration of the lease, so repair costs are minimized, which is nice perk. Bill Korum’s Puyallup Nissan offer free maintenance programs during all or part of their lease agreement, which means that all you need to worry about is putting gas in the car. Keep in mind that manufacturer warranties differ in length and coverage.
Fact #7: Leasing a car gives you more flexibility when it comes to getting rid of your old car. Unless you actually drive your car till it dies, you will have to deal with selling or trading it in at some point, which can be a hassle. Whereas, at the end of a lease term, you can: 1) Turn in your car, and either buy another car, lease another car, or re-lease from the same brand; 2) Buy the car you were leasing for the predetermined residual value on your lease contract; or 3) Buy the car you were leasing and sell it to a third party for profit (if your car is worth more than purchase price offered on your lease contract). Because the used-car market has been so strong the last couple of years, some consumers can actually make money by buying and then selling their leased car for more than the residual value of the car.
Fact #8: “Pimping your ride,” or customizing is not advisable with a lease. Generally speaking, you can do it, but at the end of your lease, you will have to remove any custom parts you add, and will have to pay any damage to the car from the modifications you made.
Fact #9: Reasonable wear-and-tear is expected and is written into a car lease contract. A lease contract will also specify what is considered “excessive.” It’s safe to say that if you return your leased vehicle with scratches, dents, worn tires, or other not-yet-repaired damages, you will be billed for those repairs. It’s also typically cheaper to repair any damages prior to returning the vehicle, rather than having the dealership repairs the damages. For buyers planning to trade-in or sell their car at some point, the condition of your vehicle will impact how much it is worth. So although there is no written contract, you will need to be mindful of the condition of your vehicle if you plan to resell.