In recent years, it has definitely become more common for vehicle dealerships to advertise their lease pricing and terms rather than their other options, such as buying a vehicle outright. So why are dealerships focusing more on car leasing rather than selling a car outright? One reason for this is simple: there is more demand for car or vehicle leasing services than ever. But there is a significant difference between buying a vehicle and leasing it, and if you mistake the two, you might end up on the losing end of the deal. So would you like to get a vehicle? Should you lease, or should you buy? Here, your top questions are answered.
- Upfront charges and costs
When you buy a car outright, you may have to put down a deposit, which consists of a percentage of the purchase price. Doing so almost always lowers your monthly payments, and it is a ‘good faith’ step with the future lender. Taxes, registration, and other fees are also required upfront.
With a lease, on the other hand, you have quite a few other upfront charges. Not only will you be obligated to pay the first month's lease payment in advance, but you will also have to pay fees such as a security deposit, a down payment, the taxes on the vehicle, and the registration. The security deposit and the down payment may be flexible, depending on your credit rating.
- Monthly payments
When you purchase a vehicle, your monthly payments are based upon a variety of factors, including the amount of your down payment, the interest rate, and your credit rating. There are also taxes, finance charges, and other fees included in each monthly payment. In certain situations, you may be able to refinance your vehicle later if the payments are too high, but this is not always possible.
Contract hire and leasing payments are often lower because you are only renting the vehicle. You have also paid quite a bit in fees upfront. You still face interest fees, taxes, and other charges depending upon the financial institution and the agreement that you signed at the time of the lease.
- Getting a new vehicle
When you decide that you are ready for a different car, you must sell or trade your old one if you own the vehicle outright. If there is still a balance on your auto loan, you are responsible for paying off the loan. There is a risk that your vehicle has depreciated too much to offer much in the way of a profit, but it may be beneficial to talk to dealers about selling your car.
With a lease, you can terminate the lease at any time. If you terminate early, there may be a fee for ending the contract before the term is up, but at the end of the lease, you can simply return the car and pay any fees that pertain to the end of the lease. Assuming that you did not damage the vehicle or exceed the mileage requirements too much, your final fees may not be large at all.
Before you decide to buy or lease, make sure that you understand exactly what is required of you for each option. When in doubt, run the numbers so that you are not making guesses regarding the costs and fees.