Ownership
Buying Considerations: When the vehicle is paid for, it’s yours. You can keep it as long as you want, and any retained value (equity) is yours to keep.
Leasing Considerations: You don’t own the car—the leasing company does. You must return the vehicle at the end of the lease or choose to buy it at a predetermined residual value; you have no equity.
Monthly Payments
Buying Considerations: You will have a monthly payment if you finance it; the payment will vary based on the amount financed, the interest rate, and the loan term.
Leasing Considerations: When comparing similar vehicles with equal costs, the monthly payment for a lease is typically significantly lower than a loan payment. This may enable you to drive a more expensive vehicle.
Mileage
Buying Considerations: Drive as many miles as you want; a vehicle with higher mileage, though, may be worth less when you trade in or sell your vehicle.
Leasing Considerations: Your lease will spell out how many miles you can drive before excess mileage charges apply (typical mileage limits range from 12,000 to 15,000).
Maintenance
Buying Considerations: When you sell your vehicle, condition matters, so you may receive less if it hasn’t been well maintained. As your vehicle ages, repair bills may be greater, something you generally won’t encounter if you lease.
Leasing Considerations: You generally have to service the vehicle according to the manufacturer’s recommendations. You’ll also need to return your vehicle with normal wear and tear (according to the leasing company’s definition), so you may be charged for dents and scratches that seem insignificant.
Up-Front Costs
Buying Considerations: These may include the total negotiated cost of the vehicle (or a down payment on that cost), taxes, title, and insurance.
Leasing Considerations: Inception fees may include an acquisition fee, a capitalized cost reduction amount (down payment), security deposit, first month’s payment, taxes, and title fees.
Value
Buying Considerations: You’ll need to consider resale value. All vehicles depreciate, but some depreciate faster than others. If you decide to trade in or sell the vehicle, any value left will be money in your pocket, so it may pay off to choose a vehicle that holds its value.
Leasing Considerations: A vehicle that holds its value is generally less expensive to lease because your payment is based on the predicted depreciation. And because you’re returning it at the end of the lease, you don’t need to worry about owning a depreciating asset.
Insurance
Buying Considerations: If your vehicle is financed, the lien holder may require you to carry a certain amount of insurance; otherwise, the amount of insurance you’ll need will depend on personal factors and state insurance requirements.
Leasing Considerations: You’ll be required to carry a certain amount of insurance, sometimes more than if you bought the vehicle. Many leases require GAP insurance that covers the difference between an insurance payout and the vehicle’s value if your vehicle is stolen or totaled. GAP insurance may be included in the lease.
The End of the Road
Buying Considerations: You may want to sell or trade in the vehicle, but the timing is up to you. If you want, you can keep the vehicle for many years, or sell it whenever you need the cash.
Leasing Considerations: At the end of the lease, you must return the vehicle or opt to buy it according to the lease terms. Returning the vehicle early may be an option, but it’s likely you’ll pay a hefty fee to do so. If you still need a vehicle, you’ll need to start the leasing (or buying) process all over.
As you can see, there are a lot of things to consider when buying or leasing a car. If you have a financial question or need assistance, contact the experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Disclosures: The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
