Many prospective customers on the lookout for a new vehicle ask, "Is it better to lease or buy a car?" This depends on your need for the car and the type of use you plan for it.
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Period of Time You Want the Car
If you plan to keep a car for longer than five years, and do not have a desire to change cars every several years, a purchase would be in your better interest. Owning the car gives you ability to make changes and modifications that you do not have the ability to do with a lease car. With a lease however, you have a requirement to fulfill the terms of the lease for the term whereby with a purchase, you can sell the car any time you like.
Amount of Down Payment
The amount of money you have to put down on the car determines whether a lease or purchase option is better. A large down payment and the ability to make payments over a long period of time make buying a more appropriate option. Leasing is attractive for those who do not have a lot of money to put down and want to make a limited number of payments.
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The amount of the down payment will influence the cost of a lease or the finance agreement for purchase. A larger down payment will make the payments lower over time. A smaller or no down payment favors a lease since the car is returned at the end of the lease. If the lessee chooses to keep the car, the down payment would be required then.
Mileage Consideraions
Leases have limits on the number of miles that can be driven in a year, usually up to 12,000 or 15,000. More miles may be purchased at a cost but if your driving needs do not exceed the limit, leasing is more advantageous than buying.
Depreciation Expense
Buying a car means that the depreciation expense is yours the minute you drive the car off the lot. This expense is taken on each year you own the vehicle and is something that you will have until you sell the car or its value equals $0. This is a cost of ownership that is not taken on by a lessee. The car is owned by the lender or dealer and the cost for depreciation is their expense. This is why mileage restrictions are in place to keep mileage low and increase the resale value of the car when the lease is up.
The Internet offers you an advantage to search for different vehicles, get various quotes and other details necessary to make a decision. Using the Internet, you have the ability to compare offers and options between leasing and buying. This process can be completed quickly and easily.
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Leasing or buying a car online involves different tools including loan comparisons charts, rate calculators, loan projections and other methods of evaluating the advisability of either a lease or a purchase. Obtaining a car online may be an easier process than going directly to a showroom.
Loan Comparisons
Websites like CarsDirect allow you to look at different cars and compare the rates for different financing options. Financing for a purchase typically has a lower interest rate than a lease option. The higher interest rate on a lease accounts for the depreciation expense that the finance company takes on during the lease period.
Rate Calculators
Rate calculators are another tool that dealers and finance companies provide. A rate calculator can show you the cost of a loan over a period of time, whether short or long. This is another method for holding financing terms equal and to determine whether leasing or buying makes sense, based on the numbers.
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Rate calculators are easy to use and are user-friendly. Online help is typically included to guide you through the process and help you analyze properly what information is being provided regarding a lease or purchase option.
Loan Projections
A loan projection looks at different variables, such as interest rates, credit rating and other factors, projecting which option is the best. Completing a projection gives you a side-by-side analysis of the financing options and applies the better solution to your situation. This is another advantage of leasing or buying a car online as opposed to other methods of obtaining a vehicle.
If you search for value, take care of your vehicle, and try your best to pay the least possible amount per month, you should end up getting a great value out of your leased or purchased vehicle.
Whether you are leasing or buying a car, want to get one that will hold its value over time. For a lease, this concept is applicable to a car's residual value. The residual value of a car is how much it will be worth at the end of a lease term. When you lease a car, you are paying to use it for a set length of time, along with paying for the estimated depreciation of the value of the car. A car that will hold its value well will have a higher residual value, and that will translate into lower monthly payments for the lessee. When you buy a car, you also want to try to get one that will hold its value over time. The less a car depreciates, the more money you'll be able to get for it if you decide to sell it or trade it in.
To keep your payments low when leasing, look for a car that will maintain a high residual value at the end of the lease term. A higher residual value means more money ends up in your pocket. You should also look for a lease that requires little or no down payment and a small security deposit. When buying, look for an auto loan that offers a low percentage or a 0 percent interest rate. Over the course of a payment plan, interest savings can add up.
