Lease Vs. Buy

Car lease vs purchase: which is the better deal?

To buy or not to buy — that is the question. At least that used to be the question. But in the 1980s, automakers began offering consumers the option of leasing a car rather than obtaining traditional financing. According to the Bureau of Transportation Statistics, the period between 1990 and 2004 saw a 2.3% increase in new car/vehicle sales, but an astounding 82% growth in new car leases. A closer look at the difference between car buying and car leasing can help explain that statistical discrepancy.

Why lease a car?

A lease is a contract granting use of a vehicle for a specified period of time in exchange for a monthly payment and some related fees. A leased car is owned by the leasing company; when the lease expires, the car is returned (though some people do choose to purchase their leased vehicle). On the question of lease vs buy, a car lease is generally considered a better short-term arrangement than a car loan (short-term meaning a period of up to 4 years). The reason is that the lessee is paying only for the portion of the car’s value that will be used up during the lease period. Consequently, monthly lease payments are lower than monthly car loan payments by about 25% to 50%. Along with deprecation costs, lease payments include rent charges and associated taxes and fees. A typical lease covers a period of 24 to 48 months. An annual preset mileage limit is part of the agreement, usually 12,000 to 15,000 miles per year, though the exact number can be negotiated. If lower, the monthly payment is lower; if higher, the payment is higher. If at the end of the lease the mileage limit has been exceeded, the lessee will be charged a per mile rate for the overage. Excess wear to the vehicle can also incur additional charges.

There are two basic types of car leases:

• Closed auto lease

In a closed-end car lease, when the lease term ends, the lessee is not responsible for any difference between the leased car’s actual value and its residual value.

• Open auto lease

In an open-end car lease, when the lease term ends, the lessee is charged or refunded the difference between the car’s residual value and realized value.

Car leasing offers several advantages over purchasing:

• Lower payments

A luxury vehicle that would be too expensive for you to buy might be affordable with a car lease. INT Auto offers discount car leases on a wide range of luxury vehicles. For examples, visit out BMW lease specials page or TOYOTA lease specials page.

• Newer vehicles

People who want to avoid the maintenance problems associated with older vehicles often decide to lease instead. Lease term lengths often coincide with the length of the manufacturer’s warranty coverage.

• Lower upfront costs

Most car leases don’t require a down payment, though an initial payment will reduce your monthly fee. In addition, the amount of sales tax charged on a lease is only for the value being used rather than the car’s entire value.

Why buy a car rather than lease?

For some people, there’s no alternative to ownership. If you’re the sort of person who always has the long-term picture in mind, then car buying will be a better option than leasing. Car buying requires greater upfront costs and higher monthly payments than leasing, but through consistent care and maintenance, those costs can be recouped once the loan has been paid off. You’ll have an older vehicle, but it will also be payment free.