You’ve been searching everywhere to find the right vehicle for you, and you’ve finally found it. Now comes the part where most Americans struggle, paying for it. As, many of us have been told countless times buying a car is the second most important thing you’ll likely buy next to your home. Our finance & insurance managers in the Preston Automotive Group are often asked, “Should I finance or lease my new car?” The answer depends on your current situation and what your ultimate purpose and goal for this vehicle is.
Let’s start with a quick survey, ask yourself the following questions:
Do I have a small down payment or even no down payment?
Do I take care of my vehicles, inside and out?
Do I drive between 10,000 to 15,000 annually?
Do I like to trade cars every 3 years or so?
If you answered yes to all 4 of those questions, leasing sounds ideal for you.
First and foremost, “What is leasing?” Dictionary.com defines leasing as granting the temporary possession or use of (lands, tenements, etc.) to another, usually for compensation at a fixed rate.
You certainly get more car, for less money when it comes to leasing! Leasing gives your average joe the option and affordability to drive that $30,000 vehicle that would typically be out of his price range if he were to finance it.
Unlike finance payments, lease payments are based on a percentage of the vehicle price. The buyer pays the difference between the base price of the vehicle and the expected value of the vehicle at lease end, often referred to as the residual value. Let’s say for instance that the car you picked has a base price of $30,000. The market has suggested that the vehicle will be worth $16,000 at the end of the lease term, meaning you would only make payments on the remaining$14,000 as opposed to the $30,000.
Technology is getting to be a huge factor in the decision making on whether or not to lease. With so many new innovations happening in the world of cars yearly, it’s very difficult to not want the best when the best comes out. Leasing allows you to trade in your vehicle at the end of your lease term with no penalty and best of all no negative equity. As long as the lease is under the allotted pre-determined mileage and free from excessive wear and tear you will be able to walk away free and not upside down on a loan. Although you can select lease terms ranging from 12 months to 48 months, the average term for an American consumer is 36 months (3 years).
Did you answer no to most or all of the survey mentioned earlier? Then the option to finance is most likely is the option for you.
The best thing about financing is you are actually using someone else’s money to purchase the vehicle, and once the last payment has been signed, sealed and delivered, you own the vehicle for good.
The desire to customize plays a huge role in the reasoning behind financing. The vehicle is yours to modify or customize as you like. Air intakes, lift kits and sometimes window tinting are very frowned upon and could be very costly in vehicle leasing. This goes hand and hand with wear and tear. You will not be penalized for any wear and tear on the car once you have taken ownership of it.
Typically on the Eastern Shore of Maryland, the finance option is exercised 8 out of 10 times. Why is that? When asked around a majority of Preston Automotive customers stated that, “I drive too many miles and I don’t have time to worry about minor wear and tear that could cost me more in the long run.” Believe it or not there are additional warranties for exceeding mileage and excessive wear and tear on a lease.
When it comes to financing vs leasing, there’s no definite answer on which one you should choose. Certain things you need to consider are your budget, driving needs, lifestyle and credit history before you decide whether to buy or lease.
There are plenty of auto lenders who can provide you with financing that works best for you, no matter whether you decide to buy or lease your next vehicle. If you still have questions and would like to schedule an appointment to sit down with one of our experienced finance & insurance managers, please give us a call today at 877-898-2470!