Choosing to lease or buy a car is a difficult decision. You must base your decision on a number of factors, such as:

•How much cash you have to put down
•Your credit score
•The number of miles you drive each year
•How long you plan on having your vehicle


Leasing has major advantages. First, the monthly payments are lower than when you purchase a car. Many dealers have lease specials to help move cars off the lot. Other advantages are:

•A Lower Down Payment

There is no down payment required during the lease, but you will need to pay drive off fees, one month’s payment up-front as well as a security deposit.

•You Can Drive A New Car Every Few Years

If you are one of those people that like to trade your car in every few years, then you may want to consider a lease. Unlike with a purchase, a lease gives you the freedom to walk away from a car only paying what you have used.

•You Only Pay For Part of The Car’s Cost

When you are leasing a car, you only pay the difference between the current price of the car and the expected price at the end of the lease term, which is known as residual value. The dealer will look at the resale history of that automobile. Using those numbers, they predict the value of the vehicle at the end of the lease term. For instance, if the car has an MRSP of $25,000 and the expected value at the end of your lease is $14,250, then you will make payments based on the $10,700 that is left. If your lease period was for three years, or 36 months, then your payment would be $297 plus taxes and other fees.

•You Can Buy The Car When It Is Over

If you fall in love with the automobile you are driving during your lease term, you can purchase it when the lease is complete. The expected market value of the above-listed option is $14,250, so that is the amount the dealer would request to buy the car. If the car happens to depreciate faster than what is anticipated, then it can work to your advantage when it comes time to buy the car at the end of the lease.

Cons To Leasing

•Leasing Is Difficult With Bad Credit

If your credit is bad, you won’t be able to get a lease. In a car loan, lenders raise the APR to cover their risk. In a lease, there is no APR so there is not much flexibility.

•You Don’t Own The Car At The End

All vehicles are turned back to the dealer, but you can purchase them if you so desire.

•Mileage is Limited

You only get 10,000 to 12,000 miles each year. You will be charged for each mile you go over. If you drive a lot, it could be a very costly addition.

Buying A Car

Buying a car is different because you own the car free and clear at the end of the loan. You can sell it, drive it, or trade it in on another model. Here are some other benefits of a lease:

•You Can Make Changes To The Car

If you want to add aftermarket rims or a sweet stereo system, you are free to modify a car you are purchasing.

•No Mileage Penalty

You can drive as many miles as you want and no one is watching you.

•You Can Sell The Car At Anytime

If you get tired of the vehicle after one year, you can sell it or trade it in for the equity.

Cons of Buying

•Higher Down Payment Required

Even with good credit, you will need to put a substantial amount down on your car.

•You Are Responsible For Maintenance

After the warranty expires, you are responsible for the repairs.

•Depreciation Can Put You In The Hole

If the value of the car drops, you may be in the hole or have negative equity. Being upside down prevents many people from getting rid of the car until it is paid in full.

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