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Buying vs. Leasing

Is it better to lease or buy?

Getting a new vehicle can be a big investment that can have your finances wrapped up for years. Knowing your personal budget and the differences between buying and leasing will help determine which option is the best for you. Contrary to popular belief leasing is a form of financing and is not the same as renting and can be complicated with the additional fees. When leasing you are financing the use of a vehicle rather than the purchase of one which occurs when you are buying. Here are a few differences to consider:

Leasing:

  • You pay for a portion of of the vehicle
  • At the end of your lease term you can return the vehicle by trading it in or buy it by paying the depreciated resale value. Some lenders may charge a disposition fee as well.
  • Usually does not require a down payment
  • Lower monthly payments as you are only paying for the use of the vehicle. However, in the long run, leasing with the intention of buying may be more expensive than buying
  • Monthly lease payments are made up of two depreciation and finance charges
  • May require a higher credit score than buying
  • Must maintain the vehicle and drive an average number of miles

Buying:

  • You pay for the entire vehicle
  • At the end of your loan term you own the vehicle outright
  • Usually requires a down payment
  • Higher monthly payments as you are buying the complete vehicle
  • Monthly payments are made up of finance and principle charges. The principle pays off the equity of the car while the finance fee pays on the interest of the unpaid balance
  • The vehicle is yours so you can drive as many miles as you want
  • Options available for less than good credit scores

 

In summary, the option to buy or lease depends on the who you are, what you like to spend monthly, and your driving lifestyle. Knowing the answers to those questions and the details to both buying and leasing will help you better answer which option is the best for you.

 

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