Buying vs. Leasing: Which is right for you?
It’s important to know what you want to do when it comes time to invest in a new vehicle! We strive to keep our customers as informed as possible, especially when it comes to such a big decision like whether or not to buy or lease your next vehicle, so we’ve outlined the differences between the two! As always, give us a call with any questions you may have: (315) 736-8291
|Ownership||You can keep the vehicle for as long as you want! This is a benefit for those who drive a lot of miles or have kids or pets that may dirty or damage the interior.||You don’t own the vehicle, but you get to use it as you please and return it at the end of the lease. You may also buy it out at the end of the lease.|
|Up-Front Costs||Includes: down payment, taxes, registration and other fees.||Typically include: first month’s payment, refundable security deposit, down payment, taxes, registration and other fees.|
|Monthly Payments||Loan payments are usually higher than lease payments because you’re paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees. However, as you make payments, you are gaining equity in the vehicle. Once you’re done paying off the loan, the car is yours. Ultimately down the road, saving money since you won’t have a car payment!||Lease payments are almost always lower than loan payments because you’re paying only for the vehicle’s depreciation during the lease term, plus interest charges, taxes, and fees. Once you’re done with your lease, you have the option to get newer vehicles more often.|
|Early Termination||You can sell or trade in your vehicle any time you want. If necessary, money from the sale can be used to pay off any loan balance.||We advise all customers to ride out their lease term. However, if you must end it early, you might be charged with early-termination charges, which can be almost as costly as sticking out the rest of your lease term.|
|Vehicle Return||When you want to get a new vehicle, you’ll have to sell or trade in your vehicle.||When your lease is up, all you do is pay any end of lease costs and walk away. You have the option to buy the vehicle outright, start a new lease in a different vehicle, extend your current lease, or just turn it in and walk away!|
|Future Value||Vehicles will depreciate, however, you’ll have equity and its cash value is yours to use as you like.||Depreciation doesn’t affect you financially so there’s no risk, and you’ve still built credit, but on the downside, you don’t have any equity in the vehicle.|
|Mileage||You’re free to drive as many miles as you please!||Most leases limit the number of miles you may drive. You’ll have to pay charges for exceeding the limits on your lease.|
|Excessive Wear & Tear||You don’t have to worry about wear and tear, but it could lower the vehicle’s trade-in value or resale value.||Most leases hold you responsible for any excess wear and tear. You’ll have to pay charges for exceeding what is considered normal wear and tear. You will also have factory warranty coverage.|
|End of Term||At the end of the loan term (typically 4-5 years,) you have no further payments and you have built equity to help pay for your next vehicle.||At the end of the lease (typically 2-4 years,) you’ll have to finance the purchase of the car or lease, or buy another.|
|Customizing||The vehicle is yours to customize and modify yourself!||The lessor wants the vehicle returned in sellable condition. Any modifications made will have to be removed before you return the vehicle.|
Lease & Purchasing Terms & Definitions
Lessee: The person(s) who enters the lease; the person(s) responsible for payment of the lease.
Lessor: An entity that leased personal property under a lease; in a traditional dealer-originated lease, the dealer is the original lessor and the lease is assigned to a subsequent lessor, such as a captive finance company or bank.
Acquisition Fee: A fixed dollar amount that is charged by the lessor that offsets some of the costs related to setting up a lease account.
Closed End Lease: A lease in which the lessor is responsible for the difference between the residual value and the realized value provided that the lessee retains the vehicle until the date of maturity. The lessee may still be responsible for excess mileage, wear and use.
Disposition Fee: A fee charged by the lessor at time of termination to process the return of the vehicle.
Excess Mileage: Mileage which exceeds the standards for normal use listed on the lease agreement, for which a lessee may be charges when the vehicle is returned.
Excessive Wear and Use: Damage that exceeds the standards for normal use listed on the lease agreement, for which a lessee may be charged when the vehicle is returned.
Residual Value: The estimated value of the vehicle at the end of the lease; this value is used to determine a portion of the monthly payment.
Down Payment: Cash paid up-front by a borrower to reduce the amount financed in a lease or loan. While a large down payment can reduce your monthly payments, it also likely will be forfeited in the event of a totaled or stolen vehicle.
Annual Percentage Rate (APR): Also called a finance rate, this is the interest rate on a loan; a percentage of the amount borrowed that a lender charges annually for the use of its money.