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Having confusion about whether to buy a car or lease it? Read ahead to know the key difference in buying vs leasing a car, in order to make an informed decision.
When you buy a car, you instantly become the owner of that car. You can keep it as long as you want until you decide to dump it, junk it, sell it or donate it. When you lease a car, you don’t own it. However, you can use it in whatever way you want but at the end of the leasing term, you will be required to return it unless you change your mind and decide to buy it.
Upfront costs of buying a car include down payment, cash price, registration and licensing fees and other costs. The costs of leasing a car include the first month’s payment, a down payment, taxes, a refundable security deposit, registration and licensing fees, and other fees.
When buying a car especially on loan, monthly loan payments are usually higher compared to monthly lease payments. This is so because when buying a car you are paying off the entire vehicle purchase price, interest plus other accompanying costs. But when leasing a car, the total cost is lower because you are paying only for the car’s depreciation value during the lease term, rent charges (interest rates) plus other accompanying costs.
Once you buy a car, you can trade it or sell it at any time. If you had purchased the car on loan, the money from the sale could be used to clear off the remaining loan. Once you lease a car, you can’t sell it but you can decide to end the lease agreement contract before the end of the agreed term. However, you will be required to pay costly early termination charges.
Once you have bought a vehicle from a private party or dealership, you can’t return it for your money. You can only trade it or resell it. Once you have leased the vehicle, you are given the option to return it early or at the end of the lease term.
After you have bought a vehicle, it will continue to depreciate in value but its cash value is yours. You can do whatever you want with it. When you lease a vehicle, you will only pay the depreciation value. You won’t be affected by its future value. The only negative aspect of leased vehicles is that you won’t have any equity it the vehicle after lease expiration.
After purchasing a vehicle, you can drive as many miles as you want. After all, it is your vehicle. Most leased vehicles come with the maximum number of miles they can be driven. However, you can negotiate with your leasing company and pay extra charges for exceeded miles.
Excessive wear and tear
You don’t need to lose sleep over excessive wear and tear, but if they occur they will lower your vehicle’s resale or trade-in value. With leased vehicle, you will be held responsible for excessive wear and tear and maybe be asked to pay extra charges.
Once you buy a vehicle, it becomes yours. So, you can customize and modify it as you like. With leased vehicles, the leasing companies want you to return it in the same condition. No added parts, no customization and not parts removed.