BUYING VS. LEASING A CAR

Generally, leasing a car has smaller monthly payments than financing a purchase of a vehicle. The reasoning is simple. Leasing a car is similar to renting a car from the dealer. Upon the end of the lease the dealer has a chance to sell the car. Therefore, the dealer prices the lease according to how much the vehicle should cost after the lease is over (residual value). On the other hand, when a vehicle is purchased, the vehicle payments are based on the full value of the car plus interest. Of course, the vehicle is yours at the end of the payment period.

If you do decide to lease a vehicle, it is recommended to get gap insurance. Gap insurance makes sure that the car is covered for its full value. This is important in case of a car accident where your car is totaled. The amount that the insurance company provides covers the balance that the dealer expects to get back. Otherwise you are liable for the difference.

In addition, if you do decide to lease a vehicle, do not invest in any cap cost, which reduces your monthly payments. Instead, put more money in deposit to lower the monthly payments. The difference is that if the car is destroyed the day after the lease, the cap cost is never returned, however the deposit is returned.

Furthermore, when you are leasing a car, the options that come with the car are also for rent. When you are acquiring options, make sure that the price is reasonable for renting the options instead of owning them. Also try to lease a vehicle for the time that it is under warranty. This will ensure that you will not be liable for the repairs or additional investments.

When leasing a car, shop for the best deal, since some dealers will offer much better deals than others. In determining whether to lease or buy a vehicle ask yourself two questions. First, am I going to drive more than 15,000 miles per year? If the answer is yes, then you are probably better off buying a vehicle, since most leases are made with terms that the vehicle will only be driven 15,000 miles per year. Second, how long will you keep the vehicle? If you are planning to keep the vehicle for longer than four years, then you are better off buying the vehicle, since in the long run it will be a better value.

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Understanding Vehicle Financing