When it comes to getting a new car, you have two primary options: leasing or buying with a loan. Each option features its own set of advantages and disadvantages. The best option will depend on your personal needs, financial situation, driving habits and personal preference. However, in order to understand what option suits your needs best you will need to understand the unique differences between the two options.
Lower Upfront Costs: Leases often require a lower down payment. In some cases, a lease can have no down payment at all, making it easier to get into a new car with less initial out of pocket cost.
Lower Monthly Payments: Leases also tend to have a lower monthly payment compared to loans. Since in a lease you are only paying for the depreciation of the vehicle during the lease term, rather than the entire value of the car.
Access to Newer Vehicle Models: Leasing allows you to drive a new car every few years.
Warranty Coverage: Since most lease vehicles are new and the lease term tends to stay within the factory warranty period, you should have significantly reduced maintenance and repair costs.
Ownership: As you make payments, you are building equity and once the loan is paid off, you become its legal owner. This can be beneficial if you plan to keep the car for a long time or plan to eventually sell it.
No Usage Restrictions: Unlike leases, there are no mileage limits with an auto loan, meaning you can drive it as much or as little as you wish without worrying about extra fees.
Access to Newer Vehicle Models: Leasing allows you to drive a new car every few years.
Freedom: You have the right to modify the vehicle as you see fit. You also have the right to sell or trade in the vehicle, which can be useful if your financial situation changes.
No Ownership: The biggest disadvantage of a lease is the fact you are not building equity and at the end of the lease you do not own the vehicle, and you have no legal right to trade in or sell the vehicle.
Usability Restrictions: Most lease offers come with strict mileage limits, often ranging from 10,000 to 15,000 miles per year. Exceeding these limits can result in significant per mile overage fees.
Wear & Tear/Condition Fees: At the end of the lease when you go to return the vehicle, you may be charged for various condition issues, including excessive wear and tear.
Early Termination Fees: Terminating a lease early can be very expensive, with fees that can be as high as several thousand dollars.
Higher Upfront Costs: You may be required to make a larger down payment to secure the loan. Dependent on the vehicle year, make and model, as well as the borrower's credit rating some loans may require as much as a 20% down payment.
Higher Monthly Payments: Auto loans will typically have a higher monthly payment amount compared to leases. Since, unlike the lease you are not just paying for the vehicle depreciation but for its entire cost.
Depreciation: Most vehicles will depreciate over time. Depending on how much you owe on the loan, it is possible to owe more on the loan than the car is worth, especially in the early years of the loan. This is also known as negative equity and is often referred to as being "upside down" on the loan.
Maintenance Costs: Once the warranty expires, you are responsible for all maintenance and repair costs, which can add up over time.
Whether your vehicle needs have changed, or you have fallen on hard times and having a hard time making the monthly lease payments, there are ways you can get out of the lease early without losing your shirt.
Negotiate with the Lessor: If you are in financial trouble, you can talk to the lessor, explaining to them that you are unable to make payments. They may offer you some payment relief by agreeing to pause the payment for a few months. You may also be able to renegotiate the lease terms, explaining to the lessor that you are unable to continue to pay for the vehicle, asking them to reduce or remove the early termination fees for you to be able to surrender the car to them in good condition.
Transfer your car lease: You are allowed to transfer your car lease granted the lessor agrees to the transfer and the new lessee qualifies for the lease. The challenging part would be to find someone to take over your lease under the same terms. There are specialist lease swap websites available however; some research on your part is required. If you can find someone to take over your lease, you may still be responsible for lease swap related documentation fees, which can amount to several hundred dollars. Finally, before pursuing this option, it is vital to ensure that a lease swap is allowed by the lessor and meets all the local legal mandates.
Buying out your lease: In most cases, the lease company will allow you to buy out your car prior to the lease term ending. By buying the vehicle, you are effectively ending the lease and becoming the lawful owner of the vehicle. Generally, this strategy only makes financial sense if the buyout amount of the lease is close to or less than the vehicle's resale value.
If you are tired of spending hours listing your car on local classifieds, answering people's inquiries who never reply to you afterwards, going on test drives with strangers and haggling over price, we can help.
Get a vehicle cash offer quote in as little as a few minutes from the comfort of your home or office.
Provide basic information about your car such as: Year, Make, Model, Trim, Mileage, Color & Condition.
Get your cash offer. You have up to 7 days to accept the offer.
Once you accept the offer, you will be contacted to arrange your desired payment method and vehicle pick up.
Here are the thoughts expressed by some of our customers:
Run a CarValid Vehicle History Report first!
Search VIN