Financing
Leasing
Buying
Credit
Check
Fixing Your
Credit
Latest
Blog Posts
|
The differences
between leasing and buying.
-
Ownership
-
LEASING: You do not own the vehicle.
You get to use it but must return it at the end of the lease unless
you choose to buy it.
-
BUYING: You own the vehicle
and get to keep it at the end of the financing term.
-
Up-front costs
-
LEASING: Up-front costs 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, taxes, registration and other
fees, and other charges.
-
Monthly payments
-
LEASING: Monthly lease payments
are usually lower than monthly loan payments because you are paying
only for the vehicle's depreciation during the lease term, plus
rent charges (like interest), taxes, and fees.
-
BUYING: Monthly loan payments
are usually higher than monthly lease payments because you are
paying for the entire purchase price of the vehicle, plus interest
and other finance charges, taxes, and fees.
-
Early termination
-
Vehicle return
-
LEASING: You may return the vehicle
at lease end, pay any end-of-lease costs, and “walk away.”
-
BUYING: You may have to sell
or trade the vehicle when you decide you want a different vehicle.
-
Future value
-
Mileage
-
LEASING: Most leases limit the
number of miles you may drive (often 12,000-15,000 per year).
You can negotiate a higher mileage limit and pay a higher monthly
payment. You will likely have to pay charges for exceeding those
limits 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.
-
Excess wear
-
LEASING: Most leases limit wear
to the vehicle during the lease term. You will likely 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 excessive wear
will lower the vehicle's trade-in or resale value.
-
End of term
-
LEASING: At the end of the lease
(typically 2-4 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 loan
term (typically 4-6 years), you have no further loan payments.
Consider all the costs involved in a lease.
At the beginning of the lease, you may have
to pay your first monthly payment; a refundable security deposit or
your last monthly payment; other fees for licenses, registration,
and title; a capitalized cost reduction (like a down payment); an
acquisition fee (also called a processing or assignment fee); freight
or destination charges; and state or local taxes.
During the lease, you will have to pay your
monthly payment; any additional taxes not included in the payment
such as sales, use, and personal property taxes; insurance premiums;
ongoing maintenance costs; and any fees for late payment. You'll also
have to pay for safety and emissions inspections and any traffic tickets.
If you end your lease early, you may have to pay substantial early
termination charges.
At the end of the lease, if you don't buy
the vehicle, you may have to pay a disposition fee and charges for
excess miles and excess wear.
Negotiating a lease, this which can be considered.
-
the agreed-upon value of the vehicle--a
lower value can reduce your monthly payment
-
up-front payments, including the
capitalized cost reduction
-
the length of the lease
-
the monthly lease payment
-
any end-of-lease fees and charges
-
the mileage allowed and per-mile
charges for excess miles
-
the option to purchase either at
lease end or earlier
-
whether your lease includes “gap”
coverage, which protects you if the vehicle is stolen or totaled in
an accident.
-
Ask for alternatives to advertised
specials and other lease offerings.
Know your rights and responsibilities
-
When you lease a vehicle, you have
the right to use it for an agreed-upon number of months and miles
turn it in at lease end, pay any end-of-lease fees and charges, and
walk away
-
buy the vehicle if you have a purchase
option
take advantage of any warranties, recalls, or other services that
apply to the vehicle.
You may be responsible for
-
excess mileage charges when you return
the vehicle. Your lease agreement will tell you how many miles you
can drive before you must pay for extra miles and how much the per-mile
charge will be.
-
excess wear charges when you return
the vehicle. The standards for excess wear, such as for body damage
or worn tires, are in your lease agreement.
-
substantial payments if you end the
lease early. The earlier you end the lease, the greater these charges
are likely to be.
|
