Leasing vs. Buying a New Car
The choice between leasing and buying has always been a tough call. On one had, buying a vehicle involves higher monthly costs, but you own something. On the other, leasing has lower monthly payments, but you get into a cycle where you never stop paying for a vehicle.
The Change in Landscape
Now more than ever, more people are choosing to lease a new vehicle over paying a car loan. The variety of luxury, compact, mainstream sedans, and small SUVs entering the new-car lease market, as well as attractive finance rates are the reason for the change in landscape.
How Loans and Leases Differ
Here are the major differences between leasing and buying.
Ownership: When you buy a vehicle, you own it and get to keep if for as long as you want. When you lease, you don’t own the vehicle. You get to use it for the length of time it is leased, but you must return it at the end of the lease unless you decide to buy it.
Up-Front Costs: Buying a car’s up-front costs include:
- Cash price or down payment, taxes, registration, and other fees
Leasing a car’s up-front costs include:
- These can include the first month’s payment, a refundable security, acquisition fee, down payment, taxes, registration, and other fees
Monthly Payments: Loan payments are usually higher than lease payments, because you are paying off the entire purchase price of the vehicle. Lease payments are almost always lower, because you are only paying for the vehicle’s depreciation during your lease term.
Early Termination: When buying a vehicle, you can sell or trade in your vehicle at any time. Money from the sale can also be used to pay off any loan balance. If you end a lease early, charges could be as costly as just waiting till the end of the lease.
Vehicle Return: Buying a car means you’ll have to deal with selling or trading in the car when you decide you want a different one. When leasing, you’ll return the vehicle at lease-end, pay any end-of-lease costs, and walk away if you decide you do not want to by the car.
Mileage: Buying a car gives you the freedom to drive as many miles as you want. Leasing restricts the number of miles you may drive, based on the amount you agree upon per year in your lease term. You’ll have to pay charges for exceeding your limits.
As you can, there are both advantages and disadvantages to leasing and buying. It is important to consider which option makes the most sense for you financially. As always, Manchester Honda is here to help with any questions you may have. Give us a call at (860)-645-3100, or feel free to contact us!