Buying a car can be overwhelming; in fact, the pleasure of getting a new car can be quickly clouded during the financing decision-making process and price negotiations. Besides price haggling, many car shoppers are plagued with the decision to lease or buy. Which financing decision is right, and why?
- Buying – The Benefits: By far, the greatest benefit of buying a car is that you may actually own it one day. Implied in this benefit is that you’ll one day be free of car payments. The car is yours to sell at any time, and you are not locked into any type of fixed ownership period.
- Leasing – The Benefits: Perhaps the greatest benefit of leasing a car is the lower out-of-pocket costs when acquiring and maintaining the car. Leases require little or no down payment, and there are no upfront sales tax payments. Additionally, monthly payments are usually lower, and you get the pleasure of owning a new car every few years.
When it comes to whether to buy or lease a car the options can be confusing. To help you make an informed decision we have provided the information below, we hope you find it informative and useful. I understand that this post looks a bit lengthy, but I promise it is good information and worth the read!
Step 1: There is a selling price whether you buy or lease your next car. You can negotiate the selling price even if you are planning to lease, just as you would if you were planning to buy.
Step 2: If you were to put the same exact amount of money down on a leased car and on a financed car, the lease payment would typically be lower than financing. This is one of the biggest draws of leasing; you can get more car for your money. With a lease payment, you’re only paying for the car’s depreciation during the term of your lease, whereas with a loan payment, you’re paying for the entire purchase price of the car.
Step 3: If you own your own business, and the car you are considering will be used for business purposes, you can write-off most, if not all of the payments by leasing. If you buy, you can only write-off a portion of the depreciation or take the mileage deduction. We recommend you consult with your tax professional about the write-off.
Step 4: Generally speaking, it is harder to get approved for a car lease than it is for a loan. So make sure to check your credit and see if you qualify.
Step 5: A car lease will have an annual mileage cap. The norm is between 10,000-15,000 miles. Once you go over the specified mileage on your leasing contract, you will incur mileage charges. If you think you will go over the mileage cap, we recommend that you pre-pay for the additional miles at the time of signing, because it’s typically cheaper to pre-pay rather than to pay at the end of the lease. When you buy, there are no rules on mileage, the car is yours to drive as little or as much as you like.
Step 6: There’s less commitment when you buy than when you lease a car. When you buy, you can drive the car till the wheels fall off, or you can sell it or trade it in at any time and pay off the remainder of your loan. With a car lease, if you want to end your lease before the term is up, you will incur costly early termination fees.
Step 7: Most leased cars are under warranty for the duration of the lease, so repair costs are minimized, which is nice perk. Some brands like BMW and Toyota also offer free maintenance programs during all or part of their lease agreement, which means that all you need to worry about is putting gas in the car. Keep in mind that manufacturer warranties differ in length and coverage.
Step 8: Leasing a car gives you more flexibility when it comes to getting rid of your old car. Unless you actually drive your car till it dies, you will have to deal with selling or trading it in at some point, which can be a hassle. Whereas, at the end of a lease term, you can: 1) Turn in your car, and either buy another car, lease another car, or re-lease from the same brand; 2) Buy the car you were leasing for the predetermined residual value on your lease contract; or 3) Buy the car you were leasing and sell it to a third party for profit (if your car is worth more than purchase price offered on your lease contract). Because the used-car market has been so strong the last couple of years, some consumers can actually make money by buying and then selling their leased car for more than the residual value of the car.
Fact #9: Customizing is not advisable with a lease. Generally speaking, you can do it, but at the end of your lease, you will have leave the customizing and lose your investment or remove any custom parts you have added. (If removed, you have to pay any damage to the car from the modifications you made.)
Fact #10: Reasonable wear-and-tear is expected and is written into a car lease contract. A lease contract will also specify what is considered “excessive.” It’s safe to say that if you return your leased vehicle with scratches, dents, worn tires, or other not-yet-repaired damages, you will be billed for those repairs. So, although there is no written contract, you will need to be mindful of the condition of your vehicle if you plan to resell.
The decision to lease or buy will always depend on your personal circumstances. If your objective is one day to be rid of pesky little car payments and you actually want to take ownership, buying a car may be the best option. If, however, if your goal is to drive a new set of wheels every three to four years and minimize your monthly costs, leasing a car may be a good alternative.
The O’Brien Automotive Family of dealerships are one of central Indiana’s best source for new Chrysler, Jeep, Dodge, Ram, FIAT, and Toyota & Scion brand vehicles along with a large inventory of pre-owned vehicles & Factory Certified Pre-Owned. Our goal is to make as many central Indiana customers as satisfied as possible when it comes to selection and competitive prices. We welcome you to stop by one of our convenient locations, call us at 317-534-2256, chat online (Indianapolis location Chrysler Brands – Greenwood location Chrysler Brands * FIAT Brand / Toyota & Scion Brands), or submit a request make an appointment to test drive your next vehicle today. Check out our lease specials by visiting this page. If you should have any questions, please give us a call! If you do not see the particular vehicle you were hunting for on the internet lease specials list, don’t fret. Simply call:
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