Paramount Kia of Asheville Buying VS Leasing Advice
Buying vs. Leasing a Car
Understanding the differences between buying and leasing is key to making an informed vehicle purchasing decision that makes the most sense for your finances, lifestyle, driving routine, and personal preferences.
The following compares the pros and cons of buying and leasing, the economics of each, and why you might choose to finance one way or another.
BUYING
Who Owns It
You have the option to buy a car with cash or finance it and make monthly payments. Whichever you choose, the car will be yours.
If you decide to finance the vehicle, there are certain obligations you'll need to meet, such as a down payment and making monthly payments on time. If you don't fulfill these obligations, the lender has the right to repossess the car.
Most people don't have enough cash to pay for the entire car upfront, so they choose to finance through a dealership, bank, credit union, or private lender. This allows them to cover the car's value, plus interest, over a period of time that both parties agree on, usually three to six years.
When you apply for financing, lenders will take into account your income, credit score, and the cost of the car. They will then determine the terms and interest rates for your auto loan. Once you negotiate and sign the necessary paperwork, the car is yours to enjoy as you wish.
Upfront Costs
If you're financing a car, the bank may ask for a down payment. This is to keep your car purchase secure. Aim for a down payment between 10% and 20% of the vehicle's MSRP. It helps lower your monthly payment too!
You can also trade in another vehicle and put the equity towards your down payment. The amount you need for the down payment depends on the lender's requirements and your credit score.
Future Value
New cars lose value over time, typically around 20% in the first year, according to Trusted Choice Insurance. The amount a car depreciates depends on its market value, make, model, and year.
But don't worry, buying a car can still be a good investment if you stay ahead of its depreciation by making payments that exceed its value decrease. This way, you can build equity that you can use towards your next vehicle when you're ready.
Remember, the future value of your car depends on how well you take care of it. So be smart and protect your investment with regular maintenance at a factory-authorized facility.
End of Payments
Once you've paid off what you owe on your contract, that's it. Your vehicle is 100% yours. The lending institution will send you a lien release as proof that the vehicle is paid off and all yours.
LEASING
Who Owns It
When you lease a car, you don't own it. Instead, you're paying to use the vehicle while the finance institution that you leased it from actually owns it. This is why leasing is often cheaper per month compared to buying a car.
Leasing also offers protection against unforeseen decreases in value caused by unexpected situations. For instance, if the car you lease depreciates due to a recall, it won't have the same impact on you as it would if you had purchased the vehicle.
Upfront Costs
You don't usually need to make a down payment when leasing. Just pay the first month's payment, a security deposit, the acquisition fee, and other fees and taxes. If you want to reduce your monthly payments, you can always pay more upfront, just like with a purchase.
Future Value
When you lease a vehicle, you don't own it, so you don't have to worry about selling it. That's the financial institution's responsibility. However, there are mileage limits and wear and tear guidelines that you need to be aware of. If you exceed these limits, you may have to pay extra when you return the vehicle.
Lease terms usually last between two and three years, which is great for those who like driving a new car every few years. Leasing also allows you to drive a nicer car for less money, especially if you can't afford to buy a car at its full market value.
End of Payments
Most people return the vehicle at the end of the lease term, but some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork and we'll make sure that you have your lease set up the way you want it.
Best Cars to Lease
The best cars to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less. Review the lease ratings to see which cars retain their value.
Buying vs. Leasing: Which Is Right for Me?
Shopping for a new car is always exciting, but it can be difficult to choose between buying and leasing a vehicle. If you're on the fence over buying or leasing, talk to a car dealership near you to discuss your options. They'll go over each option and help you find a form of payment that makes the most sense for your financial situation.
The finance center at Paramount Kia of Asheville offers a variety of leasing and financing options for the brand-new Fords and used vehicles in our inventory. If you're ready to lease or buy your next vehicle, contact us online.