What’s the Difference Between Leasing and Buying a Car?

Jun 17, 2016

lease v buy

Watch TV for any length of time and you’ll see ads for leased automobiles. The rates always seem low, and the cars are new and exciting. You probably wonder if maybe you should do a lease, and get the car you’ve always dreamed of at a lower cost. But, leasing isn’t for every consumer. Here are some of the major points to consider.

You Don’t Get to Keep It

One of the fundamental reasons most people avoid a lease is the nature of the agreement itself — at the end of the term, if you want to keep the car, you’ll have to purchase the vehicle and go through the financing part again. The money you’ve paid does count toward the overall price, but you’ll still need to secure financing to purchase the vehicle. While a car that you own can serve as collateral or earn you some money back on a resale.

Higher Insurance Costs

On the surface, lease payments seem much lower than the monthly cost of a car loan. That may not be the answer in all cases, however. Leases carry certain other costs that you have to bear, and they are not all immediately clear. Insurance is one example. The terms of your lease will dictate a certain level of coverage, and it is usually on the higher end. This means higher payments.

Moreover, if you get into an accident or suffer damage from a natural event like hail, you have no choice but to get the car repaired . Even if your insurance fails to cover the whole cost, the terms of the lease might force you to get pricey work done. Some manufacturers offer the ability to offset this risk with additional coverage plans.

Mileage Limits

One additional cost in particular deserves a more in-depth discussion — mileage limits. When you lease a car, you accept a yearly limit as to the mileage you will put on the vehicle. At the end of the lease, any overage is tallied up, and you pay a fee for each mile driven over the limit. If you carefully plan your driving time and never have an emergency arise, it is possible to anticipate accurately the number of miles you’ll put on the car in a given time. However, part of the joy of car ownership is the freedom to go where you want, when you want. Limits on driving distance will have you second-guessing your road trip plans before you’ve even made them.

Specials

Lots of dealerships, like Conyers Nissan, offer special deals on cars for sale. Leases tend to offer lots of incentives, such as, no money down or manufacturer cash back. Purchasing a vehicle, dealerships tend to offer APR specials and sometimes large discounts for older vehicles. Bargain shoppers might find the very act of finding the best price on the best automobile is the most entertaining part of the process.

As a major financial decision, your vehicular purchasing needs are highly personal. For some lifestyles and financial situations, leasing may be a good option. For many others, though, it is not, and thinking things through before you sign on the dotted line is critical to planning your future.