Buying vs Leasing a Vehicle
You’ve spent a happy afternoon browsing and test-driving the large selection of cars, trucks, and SUVs, at Preston Hood Chevrolet. But now that you’ve selected one, you need to figure out whether you want to buy or lease the vehicle. Each choice has its pluses and minuses.
You’re probably more familiar with buying a car, which confers ownership after you pay full price with cash or finance the purchase with an auto loan. The biggest advantage of buying is that you own the car and can customize it to your heart’s content and drive it as much or as little as you want to wherever you want.
After you’ve paid off the loan, you will owe no more monthly payments on your vehicle. You can keep the car for as long as it runs. You can also sell it when you feel like it or trade it in to lower the price of a new purchase.
If you end up financing your car, you’ll discover that buying is easier to understand and to do. Requirements are typically easier with lower credit scores needed. You can also shop your financing to many lenders, enabling you to pick the one with the best deal for you.
As for the disadvantages, buying a car will generally cost you more in the short term, which also equals more sales tax. Unless you have a substantial down payment, which ties up your money, your monthly payment with a purchase is generally higher than with the lease.
When the warranty on your vehicle ends, you are responsible for paying for any maintenance and repairs. The future value of your vehicle is unknown. With a lease, the value of the vehicle at the end is declared up front when you sign the lease.
With leasing, you are essentially renting a car for several years. You usually have to place a down payment. The remainder of the cost of the lease is split into equal monthly payments spread across the lease term.
One of the big advantages of leasing is the lower monthly payments because you are only paying for the expected depreciation and not the entire cost of the vehicle. These lower payments may reward you with a better vehicle, a higher trim level, or more accessories.
Your maintenance and repair costs will be lower because your vehicle will most likely still be under warranty during the entire lease term. Chevrolet even gives you one free maintenance visit during the first year.
At the end of your term, you can either trade your model in for a newer version or walk away without any obligation. You don’t have to worry about trying to sell your used car. Every few years, you will be driving a new vehicle with the latest technology.
The main disadvantage of leasing is that you never own the vehicle. You can never sell it for extra cash and you will always have to make loan payments for as long as you want to drive. Customizing your ride is not allowed and you will have to keep within certain mileage limits every year unless you want to pay extra at the end of the lease term. You will face use restrictions, such as not being able to drive to Mexico.
Leasing is also generally more complicated than buying and you have to understand terms like capitalized cost and residual value. You may need a better credit rating than you have with those having poor credit not being able to lease at all. At the end of the lease term, you may be hit with surprise expenses such as excessive miles, costs for damage such as minor nick, or compensation for a reduced value. You may be at the whim of the dealer as to what constitutes reduced value.
What to Do Now
If you’re still not sure whether buying or leasing is better for you, or you have additional questions, please contact us at Preston Hood Chevrolet. We can give you more information and show you the actual costs of buying or leasing based on the vehicle you want to own.