At the end of almost every auto ad, you see the option to buy or lease the vehicle. Low payments and interest rates often make leasing more appealing, but how do you know if it's right for you?
Consumer Reports says that car buyers first need to know the difference between buying and leasing. Obviously when you buy the vehicle, you own it and keep it as long as you want; however, when you lease a vehicle, you technically don't own it. You get to use it, but must return it at the end of the lease unless you decide to buy it.
Here's what else Consumer Reports said about the difference between buying and leasing.
Up-front costs. Depending on the vehicle, the dealer and your credit history, you may have to make a down payment on a vehicle you buy. This also comes with tax, title, registration and other fees. When you lease, you may be required to make the first month’s payment, provide a security deposit, a down payment, as well as taxes and other dealer fees.
Monthly payments. When buying, loan payments can be higher than lease payments because you’re paying off the entire purchase price, plus interest and finance charges, taxes and fees. Lease payments are almost always lower than loan payments because you’re paying for the vehicle’s depreciation during the lease term, plus interest charges, taxes and fees.
Early termination. When you buy a vehicle, you can sell or trade it at any time. If you want to terminate a lease, expect to pay extra fees that may cost as much as sticking with the rest of the contract.
Future Value. Vehicles that are bought immediately depreciate as soon as you leave the lot. Leases limit the number of miles you may drive, and you may accumulate extra charges if you exceed the contracted limit.
Excessive wear and tear. Wear and tear isn’t something you always have to worry about when you buy a vehicle, but how you maintain your vehicle will determine its resell or trade-in value. At the end of a lease, you’re responsible exceeding what’s considered normal wear and tear.
End of term. When you buy a vehicle, it’s officially yours after the loan is paid off. At the end of a lease, you’ll have to finance the purchase of the car or lease, or buy another.
Customizing. You’re free to customize a vehicle however you’d like when you buy it, but if you lease, the lessor will likely require that the vehicle is returned in sellable condition. Any mods you make would need to be removed before returning the car, and if there’s any residual damage, expect to pay to have it fixed.
(Source: Consumer Reports)
You can find more articles about vehicle purchases at PriceMyAuto.com.