Buying vs. Leasing With Dick Brooks Honda of Greer
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.
Who Owns It
You have options when it comes to buying a car: you can pay cash or finance it with monthly payments. Either way, the car will be yours.
When you decide to finance a vehicle, there are some obligations you need to meet, like making a certain down payment and paying your monthly installments on time. These are important because if you don't, the lender has the right to take back the car.
Most people don't have the full amount in cash to buy a car upfront, so financing is a popular choice. You can choose to finance through a dealership, bank, credit union, or private lender. They will cover the cost of the car, plus interest, over a period of time that both parties agree on, usually three to six years.
To determine your loan terms and interest rates, lenders will consider your income, credit score, and the cost of the car. Once you negotiate and sign the necessary paperwork, the car is all yours to enjoy and use as you please.
When financing a car, it's important to have a down payment. This gives the bank security and helps lower your monthly payment. Aim for a down payment between 10% and 20% of the car's MSRP to secure your purchase.
If you have another vehicle, you can trade it in and use any equity towards your down payment. The amount you need will depend on the lender's requirements and your credit score. So, consider making a down payment to make your car purchase more affordable and get the best deal possible.
New cars lose value over time. In fact, in the first year of ownership, a vehicle can lose almost 20% of its value, according to Trusted Choice Insurance. The amount a car depreciates depends on its market value, make, model, and the year it was manufactured.
But don't worry, buying a car is still a smart move because it helps you build equity. As long as your payments outpace the rate of depreciation, you're building value. And when you're ready for a new car, you can use that equity to help pay for it.
Remember, the future value of your car depends on how well you maintain it. So be smart and protect your investment by scheduling regular maintenance with a factory-authorized facility. It's worth it!
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.
Who Owns It
You don't own the car when you lease. You're paying for the use of the vehicle, but the finance institution that you leased it through actually owns it. This is usually why you pay less per month in a lease than if you were to buy the car.
Leasing also protects drivers from unexpected drops in value from unexpected circumstances. For example, if the vehicle you lease depreciates due to a recall, this won't affect you the way it would if you purchased a vehicle.
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.
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 Dick Brooks Honda of Greer 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.