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LEASING VS. BUYING

There are many different factors to mull over when deciding whether to lease or purchase a new car. The processes of each are very different, with leasing potentially being the more confusing of the two due to its vast terminology. However, below are some simple comparisons to help you decide which avenue is best for you.

Ownership

LEASING: When you lease, you do not own the vehicle. A leasing company usually owns the vehicle, and lets you "rent" it over a specified period. You get to use it but must return it at the end of the lease unless you choose to buy it.
BUYING: You own the vehicle and get to keep it at the end of the term.

Up-front Costs

LEASING: Up-front costs may include the first month's payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and fees, and other charges.
BUYING: Up-front costs include the cash price or a down payment, taxes, registration and fees, and other charges.

Monthly Payments

LEASING: Monthly lease payments are usually lower than monthly loan payments because you are paying only for the vehicle's depreciation during the lease term, plus rent charges (like interest), taxes, and fees.
BUYING: Monthly loan payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.

Early Termination

LEASING: You are responsible for any early termination charges if you end the lease early.
BUYING: You will be subject to a buy-out charge if you end the loan early.

Vehicle Return

LEASING: You may return the vehicle at lease end, pay any end-of-lease costs, and "walk away."
BUYING: You will have to sell or trade-in the vehicle when you decide you want a different vehicle.

Future Value

LEASING: The lessor has the risk of the future market value of the vehicle.
BUYING: The vehicle's market value eventually will drop by the time you decide to trade or sell it.

Mileage

LEASING: Most leases limit the number of miles you may drive (often 12,000-15,000 per year). You can negotiate a higher mileage limit and pay a higher monthly payment. You will likely have to pay charges for exceeding those limits if you return the vehicle, usually 10 to 15 cents per mile.
BUYING: You may drive as many miles as you want, but higher mileage will lower the vehicle's trade-in or resale value.

Excess Wear

LEASING: Most leases limit wear to the vehicle during the lease term. You will likely have to pay extra charges for exceeding those limits if you return the vehicle.
BUYING: There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle's trade-in or resale value.

End of Term

LEASING: At the end of the lease (typically 2-4 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.
BUYING: At the end of the loan term (typically 4-6 years), you have no further loan payments.