The terms of a car purchase and lease can vary dramatically. Before you head to the dealership, consider these 7 factors:
- Upfront costs
To get that new car, you’ll need to pony up some cash. What you’ll pay depends on your choice to buy or lease.
If you lease, you’ll need to put down a security deposit roughly the cost of one monthly payment. You’ll also pay some upfront fees. Expect an acquisition fee for setting up the lease, a disposition fee to clean and sell the car when your lease ends, and the cost to register your car.
When you buy, you’ll likely need to make down payment upfront. You’ll also need to cover sales tax, registration costs, and origination fees charged by the lender to set up the loan.
- Monthly payment
Monthly payments on a lease will almost always be less than those for a car loan.
At the same time, when comparing leasing vs buying a car, you might not necessarily pay less overall to lease. If you lease, you’ll pay a flat monthly payment until you return the car. If you buy, you’ll pay monthly until your loan balance hits zero. Then your monthly payment disappears.
As a result, owning a car tends to be less expensive as years go by. Hold on to the car for as long as possible to maximize the value of your money. After you pay off the loan, you can keep a well-maintained car for years without needing to make a loan or leasing payment.
- How you’ll use your car
Are you someone who wants a new car every few years? Do you need a swanky car to impress business clients? A lease could be more appealing for you. (And a car leased for business might just get you a sweet tax deduction as well.)*
Adding extra miles at the start of your lease will add to your upfront costs—not your monthly payments. And going over your mileage cap will cost you in fees when your lease is up. So, returning your car could mean an unpleasant, surprise bill for you.
- Warranty
In most cases, when you lease a car, it’ll be covered by a warranty for the entire lease term. So, as long as you lease, you can rely on that warranty.
When you buy a car, you might have a warranty for the first few years you own, but that warranty term eventually expires. Or you may purchase a car with a limited warranty or no warranty at all. That distinction has a big impact when it comes to the cost of repairs.
- Car maintenance and repairs
Whether you own or lease, you’ll need to cover the cost of maintenance and damage beyond regular wear and tear. If you buy, you’ll also need to pay for repairs when your warranty expires. And your maintenance costs may go up over time as your car ages.
- Car insurance
You’ll have to purchase auto insurance whether you lease or buy, but those who lease might wind up paying more. Standard lease agreements generally require you to carry, Guaranteed Asset Protection (GAP) insurance on top of your regular coverage.
- Your credit score
Before you decide to buy or lease, take a look at your credit score. Typically, you’ll need good or excellent credit to sign a lease agreement. And great credit will also get you the best terms on a car loan.
But loans are still an option even if your credit needs some work. When buying, you always have the choice to pay in cash or trade-in an old car to offset the cost. And you can also look into refinancing your auto loan once you have made at least one payment.
Contact us at www.ruloans.com to know more about auto refinancing and get assured help for free from our top financial experts.
