When deciding to purchase a new car, several small decisions must be made to get you from shopping online to driving off the lot. One of the biggest questions of all is how you plan to finance your new car.
For most car shoppers, minds are made up about immediately. However, many are unsure which route to take and have lots of questions about the process. With both options having both pros and cons, it is certainly true that there isn’t one “right” answer for everyone.
So, we have put together a simple breakdown of buying and leasing:
Ownership:
Buying
When you purchase the vehicle, you own the vehicle and can keep it as long as you want, as well as make any changes you want to make.
Leasing
When leasing, you do not own the vehicle. You use it for the term of the lease but must return it at the end of the leasing period unless you decide to buy it.
Up-front Costs:
Buying
Down payment, taxes, registration and other fees
Leasing
Lease payments typically include the first month’s payment, a refundable security deposit, a down payment, taxes, registration and other fees
Monthly payments:
Buying
Loan payments are typically higher than lease payments because you are paying off the entire purchase price of the car. You will also pay interest and other taxes and fees.
Leasing
Lease payments are almost always lower than loan payments because you are only paying for the vehicle’s depreciation (wear and tear over time) throughout the lease term, similar to paying to rent a car. Plus, interest charges, taxes and fees.
Early termination:
Buying
You can choose to sell or trade in your vehicle at any time. If money is still owed on the loan, you can use the money made from the sale to pay off the remaining balance.
Leasing
If you decide to terminate the lease before it is up, you will have to pay early-termination charges.
Returning a vehicle:
Buying
When you are ready to get a new vehicle, you must deal with either selling or trading in your current vehicle.
Leasing
At the end of the lease, you return the car, pay any end-of-lease costs and walk away without having to worry about selling the vehicle.
Future value:
Buying
The longer you keep your vehicle, the more its value will decrease. However, when it is time to sell, the money you make from the sale is yours.
Leasing
The future value of the vehicle doesn’t affect you negatively. However, you do not have any equity in the vehicle.
Mileage:
Buying
When buying a vehicle, there are no limits on how many miles you can put on it. Although putting more miles on it means a lower trade-in or resale value, you do not have to worry about hitting a certain limit.
Leasing
Most leases limit the number of miles you may put on the car during the lease term (typically between 12,000 and 15,000, but higher mileage limits are possible). Charges must be paid at the end of the lease term for exceeding your limits.
Wear and Tear:
Buying
You do not have to worry about wear and tear on a vehicle when you own it as much as when you lease it. However, like mileage, the more wear and tear a vehicle has, the lower the resale value will be.
Leasing
You are responsible for the condition of the car at the end of the lease term. Fees will apply for exceeding what is considered normal wear and tear of the vehicle.
End of Term:
Buying
At the end of your loan, no more payments need to be made. You have spent (typically) 4-5 years paying off a vehicle and now have a vehicle as a personal asset with value. This value can be translated into a down payment for your next vehicle, for example.
Leasing
At the end of the term (typically 2-4 years), you will have three options:
Finance the purchase of the vehicle you have been leasing
Lease another vehicle
Buy another vehicle
Customization:
Buying
You own the vehicle and you are free to modify or customize it as you choose with any parts and accessories.
Leasing
At the end of the lease term, a car brought back to the dealership (not purchased) will be sold by the dealership as pre-owned inventory. Therefore, the vehicle must be in sellable condition and any modifications or customizations will have to be removed prior to the return. If there is any damage left by the removal of parts and other customizations, you must pay to have it fixed.
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Every case is different and not every shopper is looking for the same things out of their new vehicle. If you have any questions about buying or leasing from Rochester Audi, contact us!
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