Leasing vs. Financing
Blogpost by Madison, Budds’ Blog.
April 9th, 2013
TO LEASE, OR NOT TO LEASE?
Yes, that is the question we encounter often here at Budds’ Chev. Unfortunately, it would be impossible for us to give you the right answer, but we can certainly try to make your decision simpler. First, make sure to understand the difference between the two:
Financing: You will pay the full price of the car in monthly installments over a fixed term, and when the payments stop you will still own the car.
Leasing: Like financing, you will have monthly payments over a fixed term. But instead of paying the full price of the car, you will only pay the difference between the original sales price and the residual value (what the car is estimated to be worth after the term is up). When the payments stop, you can give the car back, or pay the residual value to own it.
The next thing to do is ask yourself a few questions:
With the mileage on his car close to the limit for his lease agreement, Dave drove backward whenever possible.
How long do I want to keep this car? If you’re the type of person to drive a car for 2 or 3 years, then trade it in for a new one, leasing could be the better option. If you like to pick a car and stick with it, financing could be the way to go.
How far do I drive annually? In the lease agreement, there will be a mileage limit. If you won’t surpass that, leasing is still a great option. If you will, be aware that it will significantly increase what you owe at the end of the lease.
Let’s look at a simple list of pros and cons:
|
Leasing |
Financing |
|
PRO: Monthly payments mean you do not have to lay down the full cost of the vehicle at once. |
PRO: Monthly payments mean you do not have to lay down the full cost of the vehicle at once. |
|
CON: There is a limit on your annual mileage |
PRO: No limit on annual mileage |
|
PRO: Lower monthly payments as you are only paying the difference between the starting cost and the residual |
CON: Higher monthly payment as you are paying for the full cost of the vehicle |
|
CON: You will not own the vehicle |
PRO: You will own the vehicle |
|
PRO: For all or most of the term, maintenance will be covered under warranty |
CON: After the warranty ends you will be paying for all maintenance and parts |
In the end, it is impossible to tell you the best choice without knowing what you want and what is important to you. If you are still unsure, talk to one of our sales professionals about your different options and they can help you decide which will suit you best.