Buying vs Leasing

February 16th, 2018 by

Leasing

Orchard Park, NY – While the national average for leasing is around 27%, the Western New York market bucks the trend. Here, leasing rates at some local dealerships are as high as 70%. So, what are the benefits of leasing?

If you:

  • travel less than 15,000, 12,000 or even 10,000 miles per year;
  • like driving a new vehicle every 2-3 years;
  • like the sound of minimal maintenance costs;
  • are resigned to the fact you will likely always have a car payment;
  • like the idea of having a lower monthly payment and a nicer car;
  • have good credit;

Then leasing might be the right move for you.

So, why are lease payments traditionally lower than purchase payments? When you lease, you are only paying the depreciation of the vehicle you are driving. So, let’s take a look at a Ford Fusion S for example. Let’s say you negotiate a $30,000 purchase price. On a purchase, you are paying the full $30,000, plus taxes, fees and interest on the loan. At 7.5% interest, your payment would be $658 per month. If you were to lease (let’s say the Fusion retains 60% of its value over the course of 3 years), that means you are only financing $12,000. That would cost you $462 per month.

And, since most vehicles today come with at least a 3 year/36,000 bumper to bumper warranty – your only maintenance should consist of little more than oil changes and tire rotations.

Lease

In the interest of full disclosure, I am one of the 70%. I lease my cars. I purchased cars up until 2005. My mind set was, “why would I constantly pay for something I would never own?”

“When my car was paid for,” or so I thought, “I’d have something of value to put down on the next car.”

It wasn’t until I did the math on depreciation, that I realized leasing would get me into better cars, more often, for less money! I always heard the horror stories about damage at lease turn in and additional fees. Well, the truth of it is – I’m slightly obsessive compulsive (I’m sure my co-workers are laughing at the “slightly” in that sentence). What I’m saying is, if my car has a major dent, crunch, scratch, scrape or ding – I’m going to fix it anyway. The everyday shopping cart, door dents, or spilled coffee are considered “normal wear and tear.” And since I don’t modify my vehicles, or typically exceed 15,000 miles per year, leasing has proven a viable option for me.

But, what are the pro’s of a purchase?

If you:

  • put a lot of miles on your car (perhaps you are an on-the-road sales person);
  • have a 5-year auto loan, you will (in theory) eventually not have a car payment, and you will own your car outright. Your vehicle will then have some built up equity that you can use toward the purchase of your next vehicle;
  • don’t have the best credit. Even car-buyers without perfect credit can get an auto loan;
  • like to modify your car to your own liking;

Then a purchase might be the best option for you.

Purchase

Every customer is different and there is no one right answer when it comes to leasing vs buying. Consumers need to look at their needs, lifestyle, budget, credit history, and critically important – how many miles they drive each year. Many auto dealerships have staff who specialize in both methods of vehicle ownership. A conversation with one of these professionals can certainly steer you to the best option for you!

Posted in Finance