Buying vs. Leasing Advice From Roswell Ford
Buying vs. Leasing a Car
Understanding the differences between buying and leasing is key to making an informed vehicle purchasing decision that makes the most sense for your finances, lifestyle, driving routine, and personal preferences.
The following compares the pros and cons of buying and leasing, the economics of each, and why you might choose to finance one way or another.
BUYING
Who Owns It
You have options when it comes to buying a car: cash or financing. Both ways, the car will be yours.
If you choose to finance, there are some obligations you'll need to meet, such as a down payment and timely monthly payments. If you don't meet these obligations, the lender can repossess the car.
Most people don't have the full price of a car upfront, so financing is a popular choice. You can finance through a dealership, bank, credit union, or private lender. They will cover the car's value, plus interest, over a period of time that both parties agree on, usually three to six years.
To determine the terms and interest rates of your auto loan, lenders will consider your income, credit score, and the car's cost. Once you've negotiated and signed the paperwork, the car is yours to enjoy however you want.
Upfront Costs
When you finance a car, the bank will ask for a down payment to keep your purchase safe. To secure your car purchase, aim for a down payment of 10% to 20% of the vehicle's MSRP. This will also lower your monthly payment.
You can even trade in another vehicle and use that equity towards your down payment. The amount of your down payment is typically determined by the lender's guidelines and your credit score.
Future Value
New cars depreciate over time. In fact, within the first year of ownership, a vehicle will lose nearly 20% of its value, according to Trusted Choice Insurance. The amount a vehicle depreciates varies depending on its market value, make, model, and even the year it was manufactured.
Despite depreciation, buying a car is a great way to build equity, as long as your payments outpace the rate that its value decreases. You can use this equity to pay for your next vehicle when you're ready to get one.
Your vehicle will be worth whatever you can sell it for in the future and that depends on how well you maintain it. (Be smart and protect your investment with regular scheduled maintenance by a factory-authorized facility!)
End of Payments
Once you've paid off what you owe on your contract, that's it. Your vehicle is 100% yours. The lending institution will send you a lien release as proof that the vehicle is paid off and all yours.
LEASING
Who Owns It
When you lease a car, you don't own it. Instead, you're paying for the privilege of using it while the finance institution retains ownership. This is why leasing often has lower monthly payments compared to buying.
Leasing also provides protection against unforeseen decreases in value. If the car you lease depreciates due to a recall, it won't have the same impact on you as it would if you had bought the car.
Upfront Costs
Leases often don't require any type of a down payment. All you usually have to pay is the first month's payment, a security deposit, the acquisition fee, and other fees and taxes. But, as with a purchase, if you want to lower your monthly payments, you can always pay more upfront.
Future Value
In most leases, you don't end up owning a vehicle. Therefore, you won't be responsible for selling it. That's the financial institution's job. However, you may have mileage limits-typically between 12,000 and 15,000 miles per year-and wear and tear guidelines that, if you exceed them, could cost you extra money when you turn your vehicle back in.
Most lease terms range between two and three years, which may be attractive to drivers who like to drive a new car every few years. Leasing could also allow you to drive more car for less money, especially if you can only afford to buy a car at a lower market value.
End of Payments
Most people return the vehicle at the end of the lease term, but some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork and we'll make sure that you have your lease set up the way you want it.
Best Cars to Lease
The best cars to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less. Review the lease ratings to see which cars retain their value.
Buying vs. Leasing: Which Is Right for Me?
Shopping for a new car is always exciting, but it can be difficult to choose between buying and leasing a vehicle. If you're on the fence over buying or leasing, talk to a car dealership near you to discuss your options. They'll go over each option and help you find a form of payment that makes the most sense for your financial situation.
The finance center at Roswell Ford offers a variety of leasing and financing options for the brand-new Fords and used vehicles in our inventory. If you're ready to lease or buy your next vehicle, contact us online.
