Introduction:
Finance or lease? This question when thinking of a new vehicle can leave you with more questions than answers. Our team would love to help you make sense of it all. It can be confusing, but doesn’t have to be. Your auto finance choices are broader than ever, with various terms, great rates and leasing options.
When you buy/finance
You pay for the entire cost of a vehicle, regardless of how many miles you drive it or how long you keep it. Monthly payments are higher than for leasing. You make a down payment, pay sales taxes in cash or roll them into your loan. You pay an interest rate determined by your loan company, based on your credit score. You make your first payment a month after you sign your contract. Later, you may decide to sell or trade the vehicle for its depreciated resale or trade value.
When you lease
You pay only a portion of a vehicle’s cost, which is the part that you “use up” during the time you’re driving it. Leasing is a form of financing and is not the same as renting. You have the option of not making a down payment, you pay sales tax only on your monthly payments. You pay a financial rate, called money factor, that is similar to the interest on a loan. You may also be required to pay fees and possibly a security deposit that you don’t pay when you buy. You make your first payment at the time you sign your contract for the month ahead. At lease-end, you may either return the vehicle, or purchase it for its depreciated resale value. You may be charged a lease-end disposition fee.
Lease-versus-Buy Example
For example, if you LEASE a $20,000 car that will have, say, an estimated resale value of $13,000 after 24 months, you only pay for the $7000 difference (this is called depreciation), plus finance charges, plus possible fees. You return the car at lease-end, or buy it to own it.
When you BUY, you pay the entire $20,000, plus finance charges, plus possible fees. You own the car at the end of your loan, although its value is less than the $20,000 you initially paid.
Are you interested in financing or leasing a vehicle? Head on over to our online Finance Application HERE and get pre-approved today!