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Nine Differences Between Leasing and Buying a Car / Vehicle
By Sorli | March 27, 2009
I think many of us are still not clear what the difference between leasing a vehicle or car and buying a vehicle car. There are vast differences between leasing and buying. The main difference is the ownership of the car, when you lease, you do not own the car, where as when you buy a car, of course you become the owner of the car. More differences are shown below:
Leasing Vs Buying
- Ownership
LEASING: You do not own the vehicle. You get to use it but must return it at the end of the lease unless you choose to buy it.
BUYING: You own the vehicle and get to keep it at the end of the financing term. - Vehicle Return
LEASING: You may return the vehicle at lease-end, pay any end-of-lease costs, and “walk away.”
BUYING: You may have to sell or trade the vehicle when you decide you want a different vehicle. - Up-Front Costs
LEASING: Up-front costs may include the first month’s payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and other fees, and other charges.
BUYING: Up-front costs include the cash price or a down payment, taxes, registration and other fees, and other charges. - Early Termination
LEASING: You are responsible for any early termination charges if you end the lease early.
BUYING: You are responsible for any pay-off amount if you end the loan early. - Monthly Payments
LEASING: Monthly lease payments are usually lower than monthly loan payments because you are paying only for the vehicle’s depreciation during the lease term, plus rent charges (like interest), taxes, and fees.
BUYING: Monthly loan payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees. - Future Value
LEASING: The lessor has the risk of the future market value of the vehicle.
BUYING: You have the risk of the vehicle’s market value when you trade or sell it. - Excessive Wear
LEASING: Most leases limit wear to the vehicle during the lease term. You will likely have to pay extra charges for exceeding those limits if you return the vehicle.
BUYING: There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle’s trade-in or resale value. - Mileage
LEASING: Most leases limit the number of miles you may drive (often 12,000-15,000 per year). You can negotiate a higher mileage limit and pay a higher monthly payment. You will likely have to pay charges for exceeding those limits if you return the vehicle.
BUYING: You may drive as many miles as you want, but higher mileage will lower the vehicle’s trade-in or resale value. - End of Term
LEASING: At the end of the lease (typically 2-4 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.
BUYING: At the end of the loan term (typically 4-6 years), you have no further loan payments.
Either leasing or buying a car or vehicle have their own pros and cons. You should consider your usage of the car, your financial factor and others when leasing or buying a car. Source: Federal Reserve Board
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One Response to “Nine Differences Between Leasing and Buying a Car / Vehicle”
Comments
Tags: BUYING, capitalized cost reduction, car, lease, lease costs, leasing, leasing a vehicle, refundable security deposit, rent charges, vehicle
December 15th, 2009 at 1:52 pm
>I still prefer buying my own one. I think that's ideal.
Warren@Sell Life Insurance