When your trusty friend finally heads off to the great junk heap in the sky, you need to start thinking about a new vehicle. If you want to know the difference between leasing a new car versus buying one, this information will clear up the confusion.
When you lease a car, truck or SUV, you are renting it from the manufacturer or dealer. You must treat it just as you would treat an apartment; you must keep it in tip-top condition, avoid personalizing it with any custom paint jobs and turn it back in with minimal wear and tear. In most cases, you have the option of buying a leased vehicle after the lease term has expired. If you continue to lease, you can always enjoy driving a new car with the latest technology and safety features.
With a purchased vehicle, you can pretty much do what you want. You can take pride in ownership. If you are financing the deal, remember that you will not own the car until your loan has been paid off.
When you buy a car outright, you can drive it as much or as little as you like. With a leased car, you are limited to a certain number of miles per year, typically 10,000 to 15,000. If you return the automobile with higher mileage, you must pay a fine of roughly 15 cents per mile for the overage.
Maintenance and Insurance
Whether purchased or leased, most new and used vehicles come with a warranty. Outside of these specifications, you are responsible for fixing and maintaining the car. When you lease, the lease agreement details who must pay for each type of maintenance. Leases carry a special clause for excessive wear and tear, which means that you may owe money for scratches on the door or juice stains from the kids. When you buy, you must pay all of the expenses out of pocket. If you need new tires or brakes as a car owner, you must pay the $1,000 yourself.
At the same time, leased vehicles must carry full coverage auto insurance. The higher insurance premiums on the lease may offset the higher maintenance expenses on the car being bought outright.
When you make payments on an auto loan, you are covering the entire price of the vehicle plus taxes, fees and interest, minus any down payment. Your payments on a lease, however, cover just depreciation, interest, taxes and fees. Lease payments are almost always lower than financing payments. For example, a three-year lease on a Toyota Camry costs about $320 per month. A three-year loan on the same car would set you back about $650 per month. Even if you stretched the repayment schedule to five years, the auto loan payment would still be more.
Buying versus leasing a car has been debated for years because each method has pros and cons. Ultimately, you can use the facts presented to make an informed decision about what to do with your next vehicle.
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