Is Leasing or Buying the Right Option for You?
In the automotive finance world, the term lease has a shroud of mystery behind it. To many buyers, it conjures up images of grandfathers cautioning to buy instead of lease with the mentality that ownership of the vehicle is a more important and “trustworthy” way of buying the vehicle. In the late 20th century, that may have been true. New regulations, more consumer-centric laws, slower depreciation and more expensive, technologically advanced cars have made leasing much different than the leases your grandfather warned you about.
How does leasing a car work?
When you lease a car, you pay for a portion of that vehicle’s cost. The portion you pay is for the amount you’ll “use” over the term of the lease. A car depreciates, nothing can stop that, and a lease is the financing of that depreciation, interest (money factor) and taxes.
The “use” of the vehicle is based on your yearly driving habits, which creates the residual value that is backed by the leasing bank. Your monthly payments consist of buying the sale price of the vehicle, minus any down payment and/or incentives, to that residual value at the end of the contracted term. At the end of the term, you can buy, sell, trade or return the vehicle to the bank, giving you many different options to choose from.
Buy vs. Lease Comparison
Consider the following example. You have your eye on a $40,000 vehicle. In two years, that car will have an estimated (in this example) value of $26,000. This is called depreciation, and this is what your lease payments are made up of, plus finance charges, possible fees and taxes .
Buying the same for $40,000 car, you pay the entire amount of the vehicle’s value, plus fees and taxes and finance charges, over the contracted term of repayment.
Is leasing the better option for you?
The short answer is, it depends.
The long answer is: there are many factors to weigh in as a consumer in today’s market. The vehicle’s market depreciation is based on make, model, body style, trim and equipment, along with many other factors that a leasing bank uses to set it’s residual. The use of the vehicle, your annual driving habits, technological desires, manufacturer backed incentives and concerns about mechanical repairs under factory warranty or out of pocket are a few more that should be covered when making your decision.
How can Centennial Leasing help?
At Centennial Leasing & Sales, we don’t assume what the right answer for you but rather, provide you with all the information you need to make a wise, informed, financial decision. If you are in the market for a new or used vehicle, contact us today. One of our professional consultants will happily provide you with multiple cost comparisons for a variety of different vehicles to help you determine whether leasing or buying is the better fit for you.
We don’t want you to feel pressured into a transaction you aren’t sure of, and our professional consultants will guide you through the decision making process, to make sure you have “your BEST automotive buying experience!”