Lease vs. Own
Are you wondering how you’ll finance your next vehicle? Still not sure what the difference is between buying and leasing? Financing options can be a bit confusing. At Porsche Lehi, we want you to feel informed and in control of all of the decisions regarding your new vehicle. So we created the following Lease vs. Own guide:
– What is a lease?
A lease is a method of obtaining a new or used car. It offers an affordable means of driving a new car every few years. It involves only paying for a portion of the car’s actual cost, with the expectation that you’ll likely return the vehicle at the end of the lease. A contract is made between the lessor and the lessee for the use of the vehicle for a specified period of time and at a specified payment, both of which are subject to the stated terms and limitations outlined in the contract. With leasing, you don’t own the vehicle–you get to use the vehicle until your lease contract is up. So you’re paying for the use of the car, rather than actually paying for the car itself. You do, however, have the option to purchase the vehicle from the lessor at the lease’s end.
– What are the benefits of leasing your vehicle?
If you don’t drive too often or too far, or if you love always having the latest model, leasing may be the best option for you. There are many benefts to leasing a vehicle, including:
- Lower monthly payments
- There is often a low down payment–or no down payment at all
- You don’t have the deal with the hassle of figuring out a trade-in a the end of a lease
- You can drive a better or nicer car for less money that you could otherwise
- You can experience the newest automotive technologies every few years
- Repair costs are almost always under the vehicle’s included factory warranty for the entire duration of the lease
- You pay less sales tax
– What are the disadvantages of leasing?
If you regularly drive a lot, leasing may not be a great financing option for you. There are a few disadvantages to leasing:
- You don’t own the car at the end of the lease
- The allowed mileage for each year of the lease is limited (the average is usually 12,000 miles a year)
- You have to pay extra for any miles you drive outside of your contracted limits
- Leasing often ends up being a more expensive option in the long run
- It can be quite expensive to terminate a lease early–the monetary penalty varies from lease to lease and the method of calculating the amount will be explained in the lease contract
– What does it mean to buy?
When you buy a vehicle, you own the vehicle and get to keep it for as long as you want. When you finance a vehicle, as opposed to leasing, you often take out a loan in order to purchase the car. You make payments to a financial institution. The duration of the term of the payments is dependent on the contract between the buyer and the financial institution from which the loan is from.
– What are the benefits of buying your vehicle?
If you drive a lot on a normal basis, and if you tend to put a lot of miles on your vehicle each year, buying may be a better financing option for you. Here are some of the advantages to buying:
- A typical financing period if 48 to 72 months, after which you own the vehicle outright with no additional payments due
- You can drive the vehicle as much as you’d like, without being penalized for putting excessive miles on your car
- You can modify your vehicle as much as you want–you can customize the paint, add decals, etc.
- You can sell or trade in the vehicle after your vehicle is paid off
- It’s often less expensive in the long term to buy
– What are the disadvantages of buying?
There are a few reasons why buying may not be a great option for you or your current financial situation. Disadvantages include:
- Monthly payments are generally higher than lease payments
- Buying often requires a higher down payment
- Repair costs come out of your pocket as soon as the vehicle’s warranty expires
- Vehicles typically depreciate in value over the years
- Trading or selling your vehicle can be a hassle
Frequently Asked Questions about Financing
– How much should I spend on a new car?
Experts suggest choosing a vehicle with monthly payments that are no more than 20% of your monthly income. Don’t forget to factor in proposed purchase price, the down payment, the interest rate/terms of your loan, and the length of the loan when calculating your monthly payments.
– How much should the down payment be?
A new car loses a significant amount of its value when you drive it off the lot. You should plan on your down payment being equal to at least 20% of the purchase price of the vehicle. If for some reason, you can’t put down 20%, you still want to pay as much as you can on that down payment.
– Can I purchase my vehicle at the end of my lease?
Yes you can! If your lease includes a purchase option, you may choose to purchase the vehicle at the end of your lease. Your vehicle can be purchased at the end of your lease’s term by contacting a finance representative at our dealership. Our team will give you a payoff quote and give you the title to the vehicle when that quote amount as been paid.