Lease or Buy
BUYING AND LEASING ARE DIFFERENT
Choosing whether to lease or buy is an important decision.
ONE SHOULD CONSIDER LEASING, IF ONE:
- Likes to drive a new car every 2 to 3 years.
- Prefers lower monthly payments.
- Drives under 12,000 - 15,000 miles per year.
- Wants to avoid major service repair work.
ONE SHOULD THINK ABOUT PURCHASING A VEHICLE, IF ONE:
- Likes to keep a vehicle for longer than three years.
- Drives in excess of 12,000 - 15,000 miles per year.
- Wants to customize the vehicle.
- Wants to own the vehicle and have no monthly payments after the terms of the loan is complete.
Vehicle Leasing offers advantages to the buyers. For the buyer, lease payments will usually be lower than payments on a car loan would be, and qualification is often easier. Some consumers may prefer leasing as it allows them to simply return a car and select a new model when the lease expires, allowing a consumer to drive a new vehicle every few years without the responsibility of selling the old vehicle. A lessee does not have to worry about the future value of the vehicle, while a vehicle owner does.
THE TYPICAL ADVANTAGES OF A LEASE
Low Monthly Payments - One will only be paying off the depreciation on the vehicle. Therefore, the monthly payments are much lower than to finance the purchase of the entire car over the same period of time.
Easy Return and Turnover - Assuming the vehicle is in good shape, when the two or four years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don't have to bother with selling the car or haggling with a dealer over trade-in value. That was all taken care of beforehand.
THE TYPICAL DISADVANTAGES OF A LEASE
No Equity - Similar to paying rent on an apartment, the lease payments don't go towards owning anything. Unlike traditional financing, one can't look forward to the day when the payments will stop and the vehicle is owned outright.
Lack of Flexibility - A big penalty is usually assessed if one wants out of the lease before the full term. Bailing out early may cost as much as six extra months of payments, depending on the leasing company.
You May Pay Extra - Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 12,000 to 15,000 miles per year. Also, you'll have to pay up for any damage to the car beyond normal wear and tear when you return the lease.
Insurance May Come Up Short - If you total the car or it gets stolen, your insurance will only reimburse you for the car's market value, which might not cover what you still owe on your lease. You can buy extra "gap coverage" to protect against this, and some lease deals include it automatically.
WHY DO LEASES COST LESS?
As a general example:
When a person buys a vehicle at $23,000, they will pay the entire $23,000, plus finance charges, plus fees.
If that person leases the same vehicle that costs $23,000, that will have an estimated value of $15,000 after 24 months, then the same person pays for the $8,000 difference (depreciation), plus finance charges, plus fees.
This is fundamentally why leasing offers lower monthly payments than buying.
LET US HELP YOU DECIDE
Please stop by Metro Nissan of Montclair to speak with one of our helpful and knowledgeable sales staff to help you determine if a lease or loan is the right fit for you. We will be more than happy to help you make all the necessary calculations that are specific to your circumstances and preferences. We can even help you make the exact calculations on a specific vehicle of your choice.