Andrew Toyota Buying vs. Leasing Advice
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.
The following compares the pros and cons of buying and leasing, the economics of each, and why you might choose to finance one way or another.
BUYING
Who Owns It
Thinking about getting a car? Great choice! Let's explore how you can make it happen.
When it comes to buying a car, you have a couple of options: you can either pay for it all at once with cash, or you can finance it and pay in monthly installments. Either way, the car becomes yours!
If you opt for financing, here's what you need to know: you'll need to meet certain requirements set by the lender, such as a down payment and making those monthly payments on time. It's important to stick to these terms because if you don't, the lender could take back the car.
Now, most of us don't have the full amount to pay upfront, which is totally normal! That's where financing comes in handy. You can do this through various avenues like a dealership, bank, credit union, or even a private lender. They'll cover the cost of the car plus interest, and you'll pay it off over an agreed period, usually three to six years.
When you apply for a loan, the lender will take a look at things like your income, credit score, and the cost of the car to determine the terms and interest rates. Once everything's sorted and you've signed the paperwork, voila! The car is officially yours to enjoy!
So, whether you're ready to make a one-time payment or prefer spreading it out, there's a way to make that dream car yours. Happy driving!
Upfront Costs
When you're arranging financing for a car purchase, it's common for the bank to ask for a down payment to ensure security. Your down payment typically falls within the range of 10% to 20% of the vehicle's Manufacturer's Suggested Retail Price (MSRP), which serves to safeguard your investment and can lower your monthly payment.
Another option is to trade in a vehicle and apply any equity towards your down payment. The specific amount required for the down payment is typically determined by the lender's criteria and your credit score.
Future Value
Did you know that new cars lose value over time? It's a common phenomenon known as depreciation. According to Trusted Choice Insurance, within the first year of ownership, a vehicle can lose nearly 20% of its value. The exact depreciation rate varies depending on factors like market value, make, model, and manufacturing year.
But don't let depreciation discourage you! Buying a car can still be a smart move for building equity, especially if your payments outpace the rate of depreciation. This equity can come in handy when it's time to upgrade to your next vehicle.
Remember, the future value of your car depends largely on how well you maintain it. To protect your investment, consider scheduling regular maintenance at a factory-authorized facility. By being proactive, you can ensure your vehicle retains its value over time.
End of Payments
Once you've paid off what you owe on your contract, that's it. Your vehicle is 100% yours. The lending institution will send you a lien release as proof that the vehicle is paid off and all yours.
LEASING
Who Owns It
When you lease a car, it's important to understand that you're not the owner of the vehicle. Instead, you're paying for the privilege of using it while the finance institution retains ownership. This arrangement typically results in lower monthly payments compared to buying the car outright.
One of the advantages of leasing is that it shields you from unforeseen decreases in the vehicle's value caused by unexpected events. For instance, if there's a recall that leads to depreciation of the leased vehicle, you won't bear the brunt of it as you would with a purchased car.
Upfront Costs
Leases often don't require any type of a down payment. All you usually have to pay is the first month's payment, a security deposit, the acquisition fee, and other fees and taxes. But, as with a purchase, if you want to lower your monthly payments, you can always pay more upfront.
Future Value
Leasing a vehicle offers several benefits, especially for those who enjoy driving a new car regularly. Unlike purchasing, where you eventually own the vehicle, leasing means you won't be burdened with the responsibility of selling it later on. Instead, the financial institution handles that aspect.
Typically, leases come with mileage limits, typically between 12,000 and 15,000 miles per year, and guidelines for wear and tear. Going over these limits might result in additional charges when you return the vehicle.
Lease terms usually span two to three years, which appeals to drivers who prefer to switch to a new car every few years. Additionally, leasing can often allow you to enjoy driving a higher-value car for less money, which might be beneficial if your budget restricts you from purchasing a car outright.
End of Payments
Most people return the vehicle at the end of the lease term, but some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork and we'll make sure that you have your lease set up the way you want it.
Best Cars to Lease
The best cars to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less. Review the lease ratings to see which cars retain their value.
Buying vs. Leasing: Which Is Right for Me?
Embarking on the journey of shopping for a new car is undeniably thrilling. However, when faced with the decision of whether to buy or lease, it can often leave you feeling uncertain. Fortunately, you don't have to navigate this decision alone.
If you find yourself torn between buying or leasing, consider reaching out to a reputable car dealership nearby. They are equipped with the expertise to guide you through this decision-making process. By discussing your specific circumstances, they can tailor their advice to suit your needs, ensuring you make an informed choice.
At our esteemed dealership, Andrew Toyota, we understand the significance of this decision. That's why our finance center is dedicated to offering a diverse range of leasing and financing options. Whether you're eyeing a brand-new Toyota or exploring our selection of used vehicles, we're here to assist you every step of the way.
If you're eager to embark on the journey of leasing or buying your next vehicle, don't hesitate to reach out to us online. Let's make your automotive dreams a reality!
