Lease or Own
Are you wondering how you’ll finance your next vehicle? Still confused about the difference between buying and leasing? Financing options can often seem overwhelming and confusing. Here at Ken Garff Honda Riverdale, we want to help make that decision just a little bit easier with our Lease vs Own guide:
Leasing
What is a lease?
A lease is a method of obtaining a new or used car. It involves only paying for a portion of the car’s actual cost. A contract is made between the lessor and the lessee for the use of the vehicle for a specified period of time and at a specified payment, both of which are subject to the stated terms and limitations outlined in the contract. With leasing, you don’t own the vehicle–you get to use it until your lease contract is up.
What are the benefits of leasing your vehicle?
If you don’t drive too often or too far, or if you love having the latest car model, leasing may be the best option for you. There are many benefits to leasing a vehicle, including:
- Lower monthly payments
- There is often a low down payment–or no down payment at all
- You don’t have to deal with trade-in hassles at the end of the lease
- You can drive a better car for less money
- You can experience the newest technologies every few years
- Repair costs are always under the vehicle’s included factory warranty
- You pay less sales tax
What are the disadvantages of leasing?
If you drive a lot on a normal basis, leasing may not work well for you. There are a few disadvantages to leasing:
- You don’t own the car at the end of the lease
- Your mileage for each year of the lease is limited (the average is 12,000 miles a year)
- You have to pay extra for miles you drive outside of your contracted limits
- Leasing often ends up being more expensive in the long run
- It’s usually quite expensive to terminate a lease early if that need arises
Buying
What does it mean to buy?
When you buy your car, you own the vehicle and get to keep it for as long as you want. When you finance your car, as opposed to leasing, you take out a loan in order to purchase the car. You make payments to a financial institution. The duration of the term of the payments is dependent on the contract between the buyer and the financial institution from which they get their loan.
What are the benefits of buying your vehicle?
If you drive a lot on a regular basis, and if you put a lot of miles on your vehicle each year, buying may be the best financing option for you. Here are some of the advantages to buying:
- You can drive as much as you like, without being penalized for putting excessive miles on your vehicle
- You can modify your vehicle as much as you want–you can customize the paint, add decals, etc.
- As soon as you pay off your loan, the car is yours
- You can sell or trade in the vehicle after your vehicle is paid off
- It’s often less expensive to buy in the long term
What are the disadvantages of buying?
There are a few reasons why buying may not be the best option for you or your financial situation. Disadvantages include:
- Monthly payments are generally higher than lease payments
- Buying often requires a higher down payment
- Repair costs come out of your pocket as soon as the vehicle’s warranty expires
- Vehicles typically depreciate in value over the years
- Trading in or selling your vehicle can be a hassle
Frequently Asked Questions
How much should I spend on a new car?
Experts suggest you should not spend more than 20% of your monthly income. Don’t forget to factor in proposed purchase price, the down payment, and the interest rate/term of your loan when calculating your monthly payments.
How much should my down payment be?
You should plan on your down payment being equal to at least 20% of the purchase price of your vehicle. If for some reason, you can’t put down 20%, you still want to pay as much as you can on that down payment.
Can I purchase my vehicle at the end of my lease?
Yes you can! Your vehicle can be purchased at the end of your lease’s term by contacting a finance representative at our dealership. We will give you a payoff quote and will give you the title to the vehicle when that quote is paid.