There are many different factors to mull over when deciding whether
to lease or purchase a new car. The processes of each are very different,
with leasing potentially being the more confusing of the two due to
its vast terminology. However, below are some simple comparisons to
help you decide which avenue is best for you.
LEASING: When you lease, you
do not own the car. A leasing company usually owns the car, and
lets you "rent" it over a specified period. 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 car and
get to keep it at the end of the term.
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 fees, and other charges.
BUYING: Up-front costs include
the cash price or a down payment, taxes, registration and fees,
and other charges.
LEASING: Monthly lease payments
are usually lower than monthly loan payments because you are paying
only for the car'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 car, plus interest and other
finance charges, taxes, and fees.
LEASING: You are responsible
for any early termination charges if you end the lease early.
BUYING: You will be subject
to a buy-out charge if you end the loan early.
LEASING: You may return the
car at lease end, pay any end-of-lease costs, and "walk away."
BUYING: You will have to sell
or trade-in the car when you decide you want a different car.
LEASING: The lessor has the
risk of the future market value of the car.
BUYING: The car's market value
eventually will drop by the time you decide to trade or sell it.
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 car, usually 10 to 15 cents per mile.
BUYING: You may drive as many
miles as you want, but higher mileage will lower the car's trade-in
or resale value.
LEASING: Most leases limit wear
to the car during the lease term. You will likely have to pay extra
charges for exceeding those limits if you return the car.
BUYING: There are no limits
or charges for excessive wear to the car, but excessive wear will
lower the car's trade-in or resale value.
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 car or to lease another car.
BUYING: At the end of the loan
term (typically 4-6 years), you have no further loan payments.
But here are some quick statements that may get you the answer a little
easier:
courtesy of Maxim
Magazine [Feb. 2001]
I drive over 10 miles to work each day.
My company is paying for it.
I can't afford a big down payment.
I own my own business.
I hate paying high insurance rates.
Cars are toys: fun, but they get old.
I'm tough on the brakes.
I want a nice car, but I'm dirt poor.
Someday, this baby'll be all mine.
With a kid, I've gotta sped wisely.
I love the new car smell.
I just won the lottery!
I know jack about car maintenance.
I race for pink slips.
I'm as accident-prone as Jack Tripper.
My car is a status symbol.
I wanna pimp it up with some hydraulics.
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BUY
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BUY
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BUY
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BUY |
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