Buying vs. Leasing With Dick Brooks Honda of Greer
Buying vs. Leasing a Car
Understanding the differences between buying and leasing is key to making an informed vehicle purchasing decision that makes the most sense for your finances, lifestyle, driving routine, and personal preferences.
Here's a comparison of the pros and cons of buying and leasing, the economics of each, and why you might choose one method over the other.
BUYING
Who Owns It
When buying a car, you can pay in full or finance it with monthly payments. In either case, the car becomes your property.
Financing a vehicle requires meeting certain obligations, such as making a down payment and timely monthly payments. If you fail to meet these, the lender can repossess the car.
Most buyers choose financing over paying cash upfront. Financing options include dealerships, banks, credit unions, or private lenders. They cover the car's cost plus interest, usually over three to six years.
Lenders determine loan terms and interest rates based on your income, credit score, and the car's cost. After negotiating and signing the paperwork, the car is yours to enjoy.
Upfront Costs
When financing a car, a down payment is crucial. It provides security for the lender and reduces your monthly payments. Aim for a down payment between 10% and 20% of the car's MSRP.
If you have another vehicle, trading it in can help with your down payment. The required amount depends on the lender's criteria and your credit score. Making a down payment can make your purchase more affordable and secure a better deal.
Future Value
New cars depreciate over time. In the first year, a vehicle can lose nearly 20% of its value. Depreciation depends on the car's market value, make, model, and year.
Buying a car builds equity, provided your payments exceed the depreciation rate. When ready for a new car, you can use this equity towards your purchase.
Maintaining your car well is key to preserving its value. Regular maintenance with a factory-authorized facility is a wise investment.
End of Payments
Once you've paid off your loan, the vehicle is entirely yours. The lender will send you a lien release as proof of ownership.
LEASING
Who Owns It
Leasing means you don't own the car; you pay to use it, while the finance institution retains ownership. This typically results in lower monthly payments compared to buying.
Leasing protects you from depreciation due to unforeseen circumstances, such as a recall.
Upfront Costs
Leases often require minimal upfront costs, usually the first month's payment, a security deposit, the acquisition fee, and other fees and taxes. To lower monthly payments, you can opt to pay more upfront.
Future Value
Leasing means you won't own the vehicle and aren't responsible for selling it. However, leases typically include mileage limits and wear and tear guidelines. Exceeding these can result in additional charges.
Leases usually last two to three years, appealing to those who prefer driving a new car every few years. Leasing may also allow you to drive a higher-end vehicle for less money.
End of Payments
At the end of a lease term, most people return the vehicle. Some choose to buy it or trade it in before the lease ends. Explore these options before signing a lease to ensure it aligns with your preferences.
Best Cars to Lease
The best cars to lease are those with strong book values at lease end, as they depreciate less. Reviewing lease ratings can help identify cars that retain their value well.
Buying vs. Leasing: Which Is Right for Me?
Deciding between buying and leasing can be challenging. Consult a nearby dealership to discuss your options and find the best financial plan for your situation.
The finance center at Dick Brooks Honda of Greer offers various leasing and financing options for new and used vehicles. Ready to lease or buy your next car? Contact us online.