NEWS

Sep 10 2017

Compare Leasing – Buying a New or Used Car #auto #auction

#leasing a car
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Leasing vs. Buying

Choosing whether to lease or buy a car can be tough. The right decision can be based on a number of factors, including:

  • Your liquid cash.
  • Your credit score.
  • How much you drive.
  • How long you hope to have your vehicle.

Below we’ve outlined the pros and cons of each option to help your car buying process. For a more detailed breakdown of the car leasing process, check out our Leasing 101 page.

Leasing: Pros Cons

Pros

  • Lower monthly payments.
    • In general, lease agreements promote lower monthly payments. In addition, many car dealers will offer lease specials to help move new vehicles off their lots.
  • Lower down payment.
    • Car loans typically don’t require a down payment. Drive off fees, which include your first month’s payments, can be due at lease signing, but if you have excellent credit, you shouldn’t have to put any additional money down.
  • You can drive a brand new car every few years.
    • When you buy a new car, if you decide you don’t like it after a few years, you’re stuck with it. With a lease, you can trade it in for something else when the lease term is up—no questions asked.
  • You’re only paying for part of the vehicle cost.
    • When you buy a car, you’re financing the entire value up front. On a lease, you’re paying for the difference between the car’s:
      • Current price .
        AND
      • Its expected value at the end of your lease term.
        • Also knows as the residual value .
    • Based on the resale history of that vehicle, your dealer will predict what the value of your car will be at the end of your lease.
      • EXAMPLE .
        • You purchased a car for a current price of $30,000.
        • Its expected value is $16,500 at the end of your lease.
        • Your payments will be based on the remaining $13,500.
  • The future price of your car is set.
    • As part of a lease agreement, the future resale value of your vehicle is predicted and put in writing.
    • If the car depreciates faster than predicted. it has no effect on your lease. and could actually benefit you if you decide to purchase your car after your lease is over.

Cons

  • Leasing is hard with poor credit.
    • The better your credit the more responsible you appear on paper. Banks can raise the Annual Percentage Rate on a car loan to cover their risk, but on a lease there is not APR so banks don’t have as much flexibility.
  • When your lease is up, you don’t own the car.
    • If you finance (buy) a car, at the end you’ll own your vehicle. Not with a lease. At the end of your lease term you’ll either need to buy the car outright (you can finance it like a used car purchase) or trade it to start a new lease.
  • Mileage is limited.
    • Most leases are limited to 10,000 to 12,000 miles annually, and if you go over, you have the potential to be charged $0.15 to $0.25 per 1 mile at the end of your lease agreement, which can add up quickly.
  • Wear and tear is your responsibility.
    • At the end of your lease, you are required to turn the vehicle in a good, non-altered condition.
  • Leasing can be more expensive.
    • If you fall into the cycle of leasing one car after another, you’ll end up spending more money over time.
  • Early termination can be costly.
    • If you decide you don’t like your vehicle, or are unable to continue your lease agreement, you’ll be forced to pay a high penalty.




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