Should You Lease or Buy Your Car?

Ever since Ogg the caveman first invented the wheel, people have asked the proverbial question, "Should I buy or lease?" There's no easy answer, but choosing to lease a new vehicle instead of buying it comes down to your personal priorities. For some, the decision is based only on dollars and cents and a lease deal might seem more attractive. Others get really attached to their cars and only consider purchasing a new vehicle. Never fear, Lithia.com will help you understand the key distinctions so you can make an informed decision. We've also got over 210 Lithia Auto Dealers from coast-to-coast and are happy to make it easy for you to buy or lease the vehicle of your dreams.

When it comes to leasing, the monthly payments are generally lower than a monthly auto loan. Especially, if you are going for a luxury vehicle. But remember that when you lease, you're not building up any equity in the car with those payments, just like renting a house. However, you can purchase the car at the end of the lease for a pre-arranged price.

 

Your monthly lease payment is based on the Sale Price that you negotiate with the dealer, just like when you buy a car. It also depends on the length of the Lease; the number of months, your credit score & interest rates you agree to lease the car. With a lease you also have to consider the mileage limits. The lease contract sets a certain maximum number of miles you can drive per year. Most leases come with 10k miles per year allotment. Your monthly payment will go higher if you believe you will drive more than 10k miles per year. If you go over your predefined mileage agreement, you'll owe extra money for every extra mile at the end of the lease.

 

With a lease, you also have to deal with Residual Value. This is the value at the end of the lease, with its depreciation figured in. If you decide to buy the car after the lease expires, this is the amount you'll pay. Other factors include a Rent Charge, Taxes and Fees that are added into the lease and affect your monthly payment. Some dealers or car companies also require a down payment for a leased car. The more you put down up front, the lower your monthly lease payment will be. Of course, if you are just planning on giving the car back to the dealer at the end of the lease, you may not want to put too much cash down up front.

 

As mentioned before, the downside is that leasing is like renting. You make monthly payments but have no ownership claim or equity in the vehicle once the lease is over. But, on the positive side, if you're concerned about monthly costs, a lease eases the burden with lower monthly payments on a new car. Usually, the monthly payment is considerably less than it would be for a car loan. For this reason, some folks opt for a more luxurious car to lease than they would normally be able to afford to buy.

 

Another upside of leasing is that you get to drive a new vehicle every few years. If you like to change up the look and feel of your ride, and always experience the latest technology such as Driver Assist, or even go for an Electric Car, leasing lets you return your vehicle for something new and exciting. You also don't have to worry about car maintenance because your new leased car includes a warranty for at least three years, so any repairs and ongoing maintenance is covered. More savings in your pocket. With a lease, you never have to deal with resale, you just return the car. The only thing you have to worry about is paying any End of Lease Fees, including those for abnormal wear including any dings and scratches to the vehicle, or additional mileage on your program. Just remember to check with your car insurance carrier to make sure your insurance covers any charges that may still be due; even if the car gets totaled before the lease runs out.

 

Do you use your car for business? Then we need to talk about maximizing your tax deductions. If you use your lease car for business, you can deduct both the depreciation and financing costs that are part of each monthly payment.

 

So, where does this leave us? With buying a car, you may have higher monthly costs including loan payment and maintenance, but you own something at the end and you can do whatever you want with the car because it is yours. Paint it purple. Put in a glass pack to wake up your neighbors. On the other hand, a lease could have lower monthly payments, though you can get into a cycle where you keep trading for a new lease car every few years and never stop paying for a vehicle. A friend of mine has been leasing new cars for over 20 years. He gets a new car every three years and uses the car for business as a tax write off. He wouldn't have it any other way.

 

More people are choosing a lease over a car loan these days because various trends have changed the leasing landscape. Rather than lease a luxury sedan, consumers are turning to small SUVs as their vehicle of choice and attractive low finance rates make leasing an even better deal. Whether you're interested in buying or leasing, there's a Lithia Auto Dealer near you to answer all your questions and to make getting into a new or used car the easiest choice you'll ever make. Check the Dealer Locator right here at Lithia.com.