Leave vs Buy - Car Buying Guide @ Autotropolis.com

Lease vs. Buying

Which is the best way to buy your next vehicle? This is the million dollar question. There really isn’t a right or wrong answer. It all depends on your specific preference.

Leasing is for you if you like lower monthly payments, a new car every 2-4 years, drive an average number of miles (usually 10,000-15,000), and if you like having a car always under warranty (avoiding maintenance items that are not part of the warranty, but typically occur between the 30 and 35k mile mark such as: tires, brakes, belts, hoses, & tune ups).

Buying is for you if you like the idea of ownership, drive a lot, if you plan to keep you car for a long time, and you don’t mind the cost of repairs once the warranty has expired.

Before you make your decision to buy or lease make sure you fully understand the exact terms involved with either choice. Check out our Lease vs Buy Calculator to see the differences in payments

Leasing – When you lease, you pay only a portion of the vehicle’s cost. Since you are only paying for the car while you lease it, payments are 30% - 60% less. In most cases you have the option of not making a down payment, and may only pay only pay taxes only on your monthly payments. Your first payment will be due at the time you sign your contract.

Leasing is made up of two parts; the finance charge and the depreciation charge. The finance charge is the interest on the money the dealership has tied up in your car while you are driving it. You repay part of the money in your monthly payments, and repay the remainder when you either buy or return the vehicle when the lease term ends.

Buying – When you take a loan to buy the vehicle you pay for the entire cost regardless of how many miles you drive. You usually need to make a down payment, and must pay the sales tax upfront. Your first payment will be due one month after you sign your contact.

Loan payments also are made up of two parts; the finance charge which is the interest on the loan, and the principal charge which is what you still owe on your vehicle. The remainder of each principal payment goes towards your equity. Equity is what you will receive when you sell your car. High mileage and the longer you own your car will reduce your total equity.

So is it better to lease or buy? Again Its personal preference. Below is a table created to show you the advantage of each.

	Lease	Buy
Terms	Lease terms are usually between 2 to 4 years.	Loan contracts are usually signed for 4 to 6 years.
Type of Vehicle	The shorter term and lower monthly payment of a lease agreement allow you to drive a new and more expensive vehicle every 2 to 4 years.	Higher monthly payments make driving a new or expensive vehicle every 2 to 4 years unpractical.
Ownership	Unless you decide to purchase, you must return the vehicle at the end of the lease.	You own the vehicle.
Up-Front Costs	Up-front costs include a monthly payment, security deposit, down payment, taxes and registration fees. If you take into consideration the total cost of the vehicle and the monthly payment you want, the sum is usually less than the up-front costs of purchasing.	Up-front costs include down payment, taxes, registration fees, and other charges. This amount is usually larger when compared to lease, especially if you want an expensive vehicle with low to moderate monthly payments.
Monthly Payments	Monthly payments are calculated based on the vehicle's depreciation during the lease term, rent charges, taxes, and other fees. Lease payments are usually lower than loan payments.	Monthly loan payments are based on the total amount of purchase price, plus interest charges, taxes and other fees.
Insurance	The insurance premium is usually higher	The insurance premium is usually lower.
Early Termination	You are responsible for early termination charges, as stipulated in the lease contract.	You are responsible for paying off the loan.
Vehicle Return	You need to return the vehicle at the end of the lease. There may be some end-of-lease charges.	You keep the car.
Future Value	The lesser bears the risk of the vehicle's future market value.	If you decide to sell or trade-in the vehicle at the end of the loan term, the risk is yours.
Maintenance	You are responsible for the maintenance of the vehicle during the lease term.	You are responsible for the maintenance of the vehicle.
Mileage	Most leases impose a vehicle mileage limit. There will be extra charges if actual mileage exceeds the contract limit when you return the vehicle.	No limit.
Excess Wear	You might need to pay extra charges when you return the vehicle if the lessor determines that vehicle wear and tear is over the contract limit.	No limit. Like mileage, however, more wear and tear equals lower resale or trade-in value for your vehicle.
End of Term	At the end of lease, you can return the vehicle and walk away, lease another vehicle or purchase it for the residual value.	The vehicle is yours.

next step: Know what your trade in is worth...