Buying vs. Leasing

When shopping for a new car, you have two options: leasing or financing. But what exactly do these two terms mean and which option makes more sense for you?

To learn more about buying vs. leasing your next car, continue reading below.

 

Buying a Car

Leasing a Car


Ownership


Ownership

 

When you choose to buy or finance a car, you own it. You’re free to sell it, trade it, or even add custom accessories. However, you’ll need to stick to the terms of the financing agreement if you want to hold on to it. This includes any down payment as well as making regular monthly payments. If you fail to meet the terms of your agreement, your new car could be repossessed. When leasing, you don’t own the vehicle and the payments you make don’t go toward the purchase price (unless you decide to finance the car at the end of your leasing agreement). Instead, you’re paying for the use of the car over a specified period of time. Monthly payments are typically lower than if you finance a vehicle.

Initial Costs


Initial Costs

 

This is usually expressed as a down payment. You can either choose to make your down payment amount in cash or you can use your current vehicle as a trade-in and apply its value toward the purchase of your next vehicle. The amount of your down payment may vary depending on the price of the vehicle, your financing agreement, and your credit score.

When leasing a vehicle, you probably won’t need to make any kind of down payment. However, a security deposit may be required that will be returned to you at the end of your leasing agreement. You’ll also be required to pay any taxes and possibly the first month’s payment before you leave the dealership.


Resale Value


Resale Value

 

Since you own the vehicle, it’s resale value is based on market data and whatever you can get for it when you go to sell it. Either way, that money is all yours to keep. Take good care of your care and get regular maintenance to get the most resale value.

Since you don’t own the car, you can’t sell it. So the resale value won’t benefit you, but it’s important to keep an eye on any mileage limits or wear and tear guidelines specified in your leasing agreement since you could be liable for paying when you return the vehicle.


Agreement End


Agreement End

 

Once you’ve completed your financing agreement and paid back the money you owe on the car, you’re done. You’ll probably get a certificate from the lender that states the loan has been paid in full.

At the end of your leasing agreement, you can either return the vehicle or opt to begin financing it. You can also return the vehicle before the lease agreement is over if you want to exchange it for something else. Just make sure that you understand the terms of your leasing agreement before you sign.