Leasing vs. Buying a Vehicle
There are plenty of questions that can come up when buying or leasing your first vehicle it’s important to understand how the financial mechanics of leasing compare with a loan. In some ways, leasing is just like taking out a loan. When you lease, you borrow the entire value of the car (minus any trade-in or down payment). Cole Krum Chevrolet can help you decide which purchase option is the best option for you. When you buy a car, you will own it after the loan term is met and the vehicle is paid off, this option is usually more expensive than leasing. Since everyone's situation is different, below you can find the pros and cons of leasing and the pros and cons of buying.
- Leasing offers a lower monthly payment, There's often no down payment when leasing or only a small one.
- When leasing, You're always driving a late-model vehicle that's usually covered by the manufacturer's warranty.
- There are reduced maintenance costs due to the vehicles factory warranty.
- You can trade in your lease for a new one every 2 to 3 years, depending on your lease term.
- You can return the vehicle at lease-end, pay any end-of-lease costs, and walk away.
- If the car depreciates faster than predicted, it has no effect on your lease, and could actually benefit you if you decide to purchase your car after your lease is over
- You don't own the vehicle. You get to use it but must return it at the end of the lease. However, there is always an option to buy at that time as well.
- Lease terms have a limited number of miles between 10,000 to 12,000 miles per year. If you drive more miles, you will pay overage charges per mile at lease end.
- You aren't allowed to customize your leased vehicle in any permanent way.
- If you fall into the cycle of leasing one car after another, you'll end up spending more money over time.
- If your car is a parking lot dent and ding magnet, you could be charged wear and tear charges at the end of the lease.
- With early-termination fees and penalties, it can be expensive to terminate your lease early if your situation changes.
- When you buy, you are free to drive as much as you want! You can drive cross-country as many times as you'd like.
- Change and modify the vehicle at will, you can modify it with aftermarket parts and accessories.
- No mileage penalty, and save money in the long term since you will eventually pay the car off.
- You own the vehicle and get to keep it as long as you want it, and you can sell the car anytime
- Higher downpayment, when you buy a car, most manufacturers ask for a down payment of 10% to 20% of the value of the vehicle.
- Loan payments are usually higher than lease payments because you're paying the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.
- Once you are outside of your factory warranty, all maintenance is at the owner’s expense, which can lead to some potentially costly repairs.
- Face possible trade or sale issues when you decide to get your next car, depending on the mileage, wear and tear, and depreciation in value.
- Even though the vehicle will depreciate over time its cash value is yours to use as you like.