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St. Anthony Orthodox Group

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William Gonzalez
William Gonzalez

What's Better To Lease Or Buy A Car __TOP__

The decision on whether to lease vs. buy a car can be complicated. With both options having pros and cons, it can be hard to figure out whether leasing or buying is best for your needs and financial situation.

what's better to lease or buy a car

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To help you get a better understanding of each option, we at the Guides Auto Team will explain the differences, advantages and disadvantages of each approach. Keep reading to learn the ins and outs of leasing vs. buying a car and to get our recommendations for providers with the best auto loan rates.

Leasing a car is essentially renting it long term. You make monthly payments to drive the car for a specified period of time and number of miles. Most often, lease contracts are financed through a car dealership and last for a period of three to four years.

Which option is better for you between leasing and buying a car is one part financial situation and one part preference. In either case, fully research your options and get a realistic picture of your finances.

Once a part of the market reserved for businesses and luxury car shoppers, new car leasing is now common throughout the automotive marketplace, from subcompact cars to luxury SUVs and pickup trucks. According to the Experian credit bureau, about three in 10 new cars driven off new car dealer lots are leased, rather than purchased.

There's no easy answer to the question of whether it is better to buy or lease a new car. Each method has its pros and cons. While you can typically get lower monthly payments with a lease, you never really own the vehicle. Lease customers are subject to strict mileage limits and must keep their car in near-showroom condition throughout the lease. At the end of the lease, you have no equity to use toward a down payment on your next vehicle.

Buying a car is naturally more expensive since you have to pay the entire purchase price of the vehicle. However, once you pay off your loan, your payments end. Any equity you have in the car can be used toward the purchase of a new car. In many cases, your sales taxes are higher with a purchase than a lease.

Leasing is like renting a car for an extended period. Instead of paying the full purchase price, like you would if you were buying the vehicle, you just pay for the amount of depreciation that is expected to occur during the term of the lease, plus interest and fees. Most auto leases are closed-end leases, with the residual value at the end of the lease locked in before you even drive off the lot.

You usually, but not always, have to make a down payment on a leased car. The remainder of the lease cost is split into a series of equal monthly payments that include interest. Typical lease terms are for two or three years, though a lease agreement can be written for almost any length.

Capitalized Cost: A vehicle's capitalized cost (also known as cap cost) is the price of the car. Like with a car purchase, you should negotiate to get this price as low as possible. With most automotive-sponsored lease deals, this price is fixed. With most other leases, it's important to haggle to get this price as low as possible.

Since you are only paying for the depreciation that is expected during your time with the car, rather than the entire cost of the vehicle, your monthly payments are generally lower with a lease than a purchase. While it is critical you find an amount that fits into your monthly budget, buying on the size of the payment alone is not a great way to get a car. Instead, you want to look at the total vehicle cost.

One factor driving higher car prices is the vast array of high-tech safety, infotainment, and connectivity features available on new cars. When you lease vehicles every few years, you'll always be able to get the latest technology. That includes features such as automatic emergency braking, adaptive cruise control, and lane-keeping assist. If you need to purchase a used car to meet your budget, you might have to sacrifice the latest technology.

What you won't have to do: haggle over the value of the car. The car's residual value is set at the beginning of the lease, and won't change at the end of the contract. Naturally, most lessees won't drop off the car and walk away. Instead, the end of one lease will mark the start of their next new car lease.

Though not always the case, many leases come with smaller down payments than new car purchases. In fact, some contracts come with nothing due at signing. Though the monthly payments are higher, some leasing advocates encourage shoppers to negotiate leases with the smallest down payment possible. Their thinking is that if you pay a substantial amount upfront, and your car is declared a total loss or is stolen, the amount you paid at the beginning of the lease is lost. With a smaller down payment, you'll have less to lose if something awful happens to the vehicle.

Since the leasing company owns the vehicle, they can place strict limits on how you can use the car, how you can customize it, and in some cases, where you can drive. For example, with some leases, you have to get special permission before taking the car into Canada or Mexico. If you don't follow the rules of the contract to the letter, the lease declared in default, and your vehicle can be repossessed.

When you lease cars, you will always have a car payment. With a vehicle that is purchased and financed, the payments end once the loan is paid off. With a car loan, your payments are also likely to be more consistent than lease payments. Here's why: Most car loans last four to six years and the payments are the same each month. With a lease, you'll get a new monthly lease payment amount each time you get a new car, which is likely going to be every two to three years. As vehicle prices are rising, you can expect the lease payments on each successive lease to be higher than the last.

Vehicle leases almost universally come with strict mileage limits. Exceed the mileage cap, and a lease can get very expensive, very quickly. Though it depends on the type of car you lease and the leasing company, most excess mileage charges range from 15 to more than 40 cents per mile. If, for example, you have a 25 cent-per-mile excess mileage fee and you commute 20 miles to work, each round-trip will cost $10.

Before you even think of leasing a car, you must have a reasonable estimate of the number of miles you annually drive. Since the number of miles you're expected to drive is priced into the lease, traveling drastically fewer miles than the contract allows is as much of a waste of money as going over mileage. You will have paid for miles you didn't drive.

Some drivers like to make their cars stand out with customized wheels or other accessories. If that's you, leasing is probably not the right choice. Most leases require you to return the car in the same condition it left the showroom, with some reasonable wear and tear.

While there are ways to get a small amount of cash back at the end of your lease, most lessees will walk away at the end of the contract with nothing to put forth as a down payment on their next car. On the contrary, many lease customers will have to pay excess mileage, excess wear, or disposition fees at the end of their contracts.

As we have mentioned in previous sections, the amount of money you owe at the end of the lease can be surprising. You may not just be able to drop your car off and walk away. Estimating the amount you'll owe in excess mileage costs is pretty straightforward. Determining what excess wear costs a dealership may want to claim is harder to guess. They'll likely have considerable latitude as to what to charge, and the amount of flexibility they have may be based on your willingness to lease another vehicle from them.

The bottom line is that unless you plan to use the car for anything beyond routine driving, you'll want to check with the leasing company or have an attorney review the lease. You must ensure that such use does not violate the term of the contract.

Though there are leases available for consumers with poor credit, leasing is typically reserved for shoppers with good to excellent credit scores. According to the credit bureau Equifax, only 8.5% of leases originated in September 2019 were to consumers with subprime credit scores.

To get the best lease deals, including those offered as incentives by automakers, you'll need excellent credit. While shoppers with lousy credit can lease vehicles, it's typically much more expensive and complicated for them to do so. Not only will the money factor (interest rate) on the lease be much higher than it would be for a shopper with good credit, but the leasing company may attach additional stipulations into the contract.

Though it would cost you a bit of money, it's a good idea to have an accountant or attorney go over the lease before you sign. The small investment in professional advice might save you thousands of dollars in the long run. If the dealership or leasing company balks at the delay caused by an expert review, or won't allow you to see the contract before it's time to sign, you should consider it a red flag and walk away from the deal.

When cars aren't selling at the pace automakers desire, they frequently offer lease deals to pick up the sales pace. While affordable lease incentives can be a pro of leasing, the terms and conditions of the deal can move them into the con column.

When you have a leased vehicle, your maintenance costs may be higher than they would be on a car you own. You not only need to demonstrate that all required periodic maintenance has been performed, but you also have to show that it's completed to factory specifications. While a leasing company or automaker can't generally require you to use specific shops, they can demand that you use factory parts. They can be more expensive than aftermarket parts.

A lease is a contract between you and the leasing company. If you break that contract by failing to make your lease payments or returning the car before the contract is up, the financial penalties can be hefty. If you have a three-year lease, for example, you're generally committed to that car for three years. If you owned the vehicle, you could sell it whenever you want to. 041b061a72


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