AUTO LEASING: You do not own the car, you just rent it. At the end of the lease you can return the car or choose to buy it.
AUTO BUYING: You own the car and get to keep it at the end of your payments.
Monthly Payments
Monthly Payments
AUTO 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.
AUTO 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. The larger your down payment the smaller your monthly payments.
Early Termination
Early Termination
AUTO LEASING: You are responsible for any early termination charges if you end the lease early.
AUTO BUYING: You are responsible for any pay-off amount if you end the loan early.
Vehicle Return
Vehicle Return
AUTO LEASING: You may return the car at lease end, pay any end-of-lease costs, and "walk away."
AUTO BUYING: You may have to sell or trade the vehicle when you decide you want a different vehicle.
Mileage
Mileage
AUTO 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.
AUTO 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
Excess Wear
AUTO 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 vehicle.
AUTO 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
End of term
AUTO 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 car.
AUTO BUYING: At the end of the loan term (typically 3-5 years), you have no further loan payments.
You're more likely to buy
When you lease a car, you are typically capped at 15,000 miles a year. Additional mileage can cost you up to 35 cents per mile. And that can really add up.
If you like to personalize a car, this investment can be lost on a leased car.
If you like the idea of ownership, you are less likely to be happy with the lease option.
If you like the feeling of accomplishment that paying off a large purchase brings and should consider that when you lease a car, the payment ends only when you return the car.
If the car you presently own is over 3 years old you are more likely a buyer. While not always true, you can usually drive for less if you're willing to buy and drive for at least 3 years.
If you don't mind doing your own car repairs, you probably don't mind driving a car after the warranty expires.
Lease arrangements usually involve a 15,000 miles-per-year cap and charge for extra miles. If you drive very little, you may be a candidate for a luxury lease.
When you negotiate a 24 or 36-month lease, you can be sure you'll always be driving a new vehicle.
Although you need to maintain and repair your leased vehicle just as you would an owned vehicle, because you typically lease for 2 to 3 years, the car is normally under warranty.
Many people prefer to drive a vehicle that is priced above their means and leasing provides the solution.
If you don't mind not owning the car, you are free to enjoy the benefits of leasing like low monthly payments and a low down payment.
If you own the company, and you use your car for business, check with your tax advisor. You may be able to deduct your auto expenses, including your monthly lease payment. And if the company you work for gives you a monthly car allowance, you may want to lease since you'll be able to drive a nicer car for a lower monthly payment.
