This is probably one of the most common questions asked by consumers looking for a new vehicle. Ultimately, it is a personal decision based on your current and anticipated ownership habits. Complete the quiz below to see which option might be the best fit for you!
You're more likely to buy
- When you lease a car, you are typically capped at 15,000 miles a year. Additional mileage can cost you up to 35 cents per mile. And that can really add up.
- If you like to personalize a car, this investment can be lost on a leased car.
- If you like the idea of ownership, you are less likely to be happy with the lease option.
- If you like the feeling of accomplishment that paying off a large purchase brings and should consider that when you lease a car, the payment ends only when you return the car.
- If the car you presently own is over 3 years old you are more likely a buyer. While not always true, you can usually drive for less if you're willing to buy and drive for at least 3 years.
- If you don't mind doing your own car repairs, you probably don't mind driving a car after the warranty expires.
You're more likely to lease
- Lease arrangements usually involve a 15,000 miles-per-year cap and charge for extra miles. If you drive very little, you may be a candidate for a luxury lease.
- When you negotiate a 24 or 36-month lease, you can be sure you'll always be driving a new vehicle.
- Although you need to maintain and repair your leased vehicle just as you would an owned vehicle, because you typically lease for 2 to 3 years, the car is normally under warranty.
- Many people prefer to drive a vehicle that is priced above their means and leasing provides the solution.
- If you don't mind not owning the car, you are free to enjoy the benefits of leasing like low monthly payments and a low down payment.
- If you own the company, and you use your car for business, check with your tax advisor. You may be able to deduct your auto expenses, including your monthly lease payment. And if the company you work for gives you a monthly car allowance, you may want to lease since you'll be able to drive a nicer car for a lower monthly payment.
Below is some additional information related to buying and leasing vehicles that you may find helpful:
PAYING CASH VS. FINANCING
In both scenarios, the consumer is responsible for the entire purchase price of the vehicle plus any applicable taxes, tags, fees, etc. The tax is based on the entire purchase price and the entire amount is paid to the dealer upfront. Yes, even in a finance situation, the dealer is paid upfront. The only difference is the bank pays the dealer the amount that the consumer finances. The consumer then pays the amount financed to the bank plus interest over the term of the loan.
LEASING
When you lease a car, the leasing institution will predetermine the estimated future value of the vehicle, and you pay on the difference between the purchase price and the estimated future value of the vehicle, plus the lease charges that are assessed by the leasing institution for advancing the purchase price of the vehicle to the dealer. Unlike a purchase, the taxes are generally paid on the monthly payment, or the depreciation, and not the entire amount. This can vary by state.
RESIDUAL/FUTURE VALUE
This figure is established by the leasing institution, in advance. This figure is influenced by historical data, as well as anticipated mileage and condition of the vehicle on return. A 10,000 mile per year lease will be less expensive than a 15,000 mile per year lease because the value of a lower mileage vehicle will be higher at the end of the lease. It is also assumed that the vehicle will be in good condition at the end of the lease term.
ADVANTAGES & DISADVANTAGES OF PAYING CASH
Owning a car outright means that it’s yours. If you ever want or need to sell it, you can. If you take good care of the vehicle and choose to keep it for an extended period of time you can enjoy the vehicle for years without payment. If you decide to trade it, 100% of the equity can be applied to the new vehicle. Because there are no mileage restrictions, you can put as many miles on it as you want with penalty. The only impact these miles have are potential additional depreciation. Scratches and damage are also only an issue as it impacts the value of the car. You can also customize the vehicle as you choose. The biggest disadvantage is that you no longer have access to the cash investment you made in the vehicle.
ADVANTAGES & DISADVANTAGES OF FINANCING
Financing is similar to owning a car from the standpoint that once you have paid the loan in full, you can drive it for an extended period of time without any payment. Because there are no mileage restrictions, you can put as many miles on it as you want with penalty. The only impact these miles have are potential additional depreciation. Scratches and damage are only an issue as it impacts the value of the car. You can also customize the vehicle as you choose. The disadvantage is the if you have little or no down payment, you could owe more than the car is worth for a few years.
ADVANTAGES & DISADVANTAGES OF LEASING
Leasing is usually best for someone who likes to trade their vehicle in regular cycles. Since you are only paying on the depreciation of the vehicle, it often allows for the consumer to get an upgraded vehicle at the same or lower payment. However, since the leasing institution has predetermined the value of the vehicle at the end of the lease and given you credit for that amount, they do have mileage and vehicle condition limitations that you need to adhere to or this could cause charges at termination. It is also rare to have equity at any time during the lease as the structure by its nature is designed to be at residual value at the end of the lease. And since it will be returned to the leasing institution, you need to be careful with modifications to the vehicle.
At Dimmitt Automotive Group, we are here to assist you in determining which choice is best for you. Please give us a call at 727-608-5755 and schedule your consultation today.
