Once you find that perfect car, finding a way to finance your next new vehicle will help bring it one step closer to coming home with you. Should you buy the new car or is a lease a better option? To help make that decision easier, let's take a look at the pros and cons of each.
BUYING OR LEASING: WHICH IS RIGHT FOR YOU?
BUYING
Pros
- Ownership costs are spread over a longer period of time
- You can customize your vehicle since you own it
- Once the loan is completed you keep the vehicle
- You don’t have a limit on the number of miles you drive
- Trade-in or resale value is there when you need to change vehicles
- Cost of ownership is cheaper in the long term
Cons
- Monthly payments are typically higher than a lease
- You’re responsible for most repairs when the warranty is over
- When it comes time to selling or trading the vehicle, you’re responsible for it
LEASING
Pros
- Typically lower monthly payments compared to a loan
- Always driving a vehicle under warranty meaning most repairs will be covered
- Driving a new vehicle every three years (or end of the lease term)
- You're not worried about trade-in value when switching to a newer car
- Potential tax deductions
Cons
- Leases typically limit miles between 12,000 to 15,000 miles. Extra fees when you go over.
- You don’t own the car and need to return it when the lease term ends
- Potential for higher upfront costs: security deposit, first month’s payment (sometimes), acquisition fee, registration fees, and taxes
- Your monthly payments don’t build up any equity
- Higher costs in the long-term
- Potential fees at the end of lease term
FREQUENTLY ASKED QUESTIONS
Is Insurance Required with a Leased Vehicle?
Insurance is required for both purchasing and leasing a vehicle. In some cases, the insurance costs may be higher for a leased vehicle in situations where gap coverage is required. For purchased vehicles, typically the lender will require full coverage, but once you pay off the loan, you can opt to switch to minimum liability coverage for lower insurance costs.
What are Some of the Factors That Go into Calculating a Monthly Lease Payment?
While a loan payment is based on the purchase price of the vehicle, lease payments are based on the car's depreciation. This typically leads to lower monthly payments. The lease term can also play a part in the monthly costs. Longer lease terms will typically have lower payments. If you need to bring down the cost of a lease more, you can also opt to increase your down payment as well.
What is GAP Insurance?
In the unfortunate circumstance that your leased vehicle is stolen or totaled, typically your lease is still in force until the lease is paid in full. Gap insurance helps pay the difference between the car's value and the remaining balance on the lease to help minimize your losses. Some leases will include gap insurance in the lease agreement, and you should check to see if it is included or not before getting gap insurance on your own.
What Type of Upfront Costs are Associated with Leasing a Vehicle?
You will typically need to pay the first month's payment and down payment when you're leasing. With a lease, a larger down payment can bring down monthly costs, but you also have to consider that you're not building any equity with a lease. You will also see an acquisition fee factored in the costs and is associated with the administrative costs of the leasing company. Depending on the lease, you may also need to place a security deposit (returnable) that will typically cost around one month's payment.
What Are Some of the Costs Which May Come up at the Lease-End?
- Early Termination Fee: This fee is charged if you try to end the lease contract early.
- Disposition Fee: This fee may be assessed to cover the costs of cleaning and selling the vehicle once the lease ends.
- Per-Mile Fee: Each lease contract will indicate the number of miles that you can drive each year or during the term of the lease. Going over this limit can add charges for each additional mile and is typically between 15 to 30 cents per mile. This doesn't seem like much, but going over 1,000 miles above your limit can cost between $150 and $300.
- Wear and Tear: While normal wear and tear will occur during the duration of your lease, the lease agreement can charge fees for excessive damage to the leased vehicle. The lease agreement will define what constitutes excess wear and tear.
Can You Buy Your Leased Vehicle?
At the end of the agreement, you may have the option to purchase your lease. Instead of returning the car at the lease term's completion, you can buy the car and the price will be based on the residual value of the car. This amount will be determined at the beginning of the lease agreement and is an estimate of what the vehicle's value would be at the lease's end. Some lease agreements may also refer to this as the buyout amount or the purchase option price. You can pay the buyout amount with cash, or choose from a range of financing options. This can be a good choice if you end up loving your car and don't want to lease another vehicle.
Visit Kevin Whitaker Chevrolet Cadillac Today!
When it comes to financing, our team here at Kevin Whitaker Chevrolet Cadillac in Greenville is here for Greer and Powdersville customers. We've been helping drivers from Simpsonville find their perfect vehicle and you can discuss financing with us. If you already have a vehicle in mind, getting an estimate of your credit score and/or getting pre-qualified can help simplify the process.
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Kevin Whitaker Chevrolet
2320 Laurens Road
Greenville, SC 29607
- Sales: (864) 900-4256
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