Usually, many people don’t consider leasing a vehicle because they’re not sure exactly how it works – or if it’s right for them.  

When you purchase a vehicle, you’re buying the entire cow.  You generally make a down payment, pay title, tax and license fees {sometimes these are included in your monthly payment} and pay an interest rate that’s determined by the financial institution that’s backing your loan. You make your first payment usually within 30 days and later you have the option to sell or trade. 

When you lease a vehicle, you’re only required to pay for a portion of the cost. You generally don’t make a down payment and you’ll pay the sales tax in your monthly payments.  You’ll have to pay something called a money factor, which is similar to interest on a loan and you might be required to pay a security deposit as well as other fees. Your first payment is due at the time you sign the contract and when the lease is up, you have the option of returning the vehicle or purchasing it at resale value.

For example, let’s say you’d like to lease instead of buy this time around and the vehicle is priced at $25,000.00. After two years, the car might have an estimated resale value of $17,000.00.  If you pay the difference of $8,000.00 {called the depreciation value}, including any finance charges and other fees, the car now belongs to you.

On the other hand, if you bought the vehicle, you would pay $25,000.00 via a loan through your bank or other financial institution, and also be required to pay any extra charges and all fees associated with the loan.

So, which is better – to buy or to lease?   

Leasing offers lowers monthly payments and warranties, and if you don’t care about ownership in the traditional sense, and enjoy driving the latest models every few years, then leasing is for you.

Purchasing  means higher monthly payments and out of pocket expenses when the warranty expires, however it offers ownership, the ability to sell your car or trade it in later, and if you’re into customizing your vehicles, you’ll want to buy.

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