The Lease vs. Buy Decision

The decision to buy or lease an automobile can be a difficult one for many consumers. There are several resources available to car shoppers who need to find out whether it is better to buy or lease new vehicles.

Seeking Car Loans With Good Rates

There are two schools of thought for consumers interested in financing a new vehicle purchase or lease. Many consumers opt for outside financing to avoid heavy sales pitches from car dealers and find better rates. Companies like CarDirect have loan calculators that help consumers determine the loan size appropriate for particular budgets. This online service differentiates between leased and purchased cars to show that each transaction type comes with a distinct price tag.

It is possible to get financing for a purchase or lease through the car dealership the day of the transaction. Companies like Toyota have financial services departments that pre-approve consumers and offer special programs for people with bad credit or insignificant credit histories. These programs are ideal for drivers who want to find financing deals for purchases and leases, while cutting down on paper work required by outside lenders.

Researching Credit Reports Before Heading To The Dealership

Every consumer who is thinking about buying or leasing a vehicle needs to look at an updated copy of his or her credit report. This report will be used by dealerships and financing companies to determine interest rates, payment amounts, and minimum deposits. The Federal Trade Commission has worked with major reporting agencies through AnnualCreditReport.com to offer free credit file information once per year.

The average score on these reports may help consumers make their decisions between buying and leasing vehicles. An unfavorable rate may lead to a prohibitively high financing agreement for the purchase of a new vehicle. One of the main attractions of leasing a vehicle is that the monthly payments are lower, and the financial commitment is less significant over the term of the agreement.

Tracking The Value Of Vehicles

Most consumers know the old adage that a car loses a significant portion of its value as soon as it leaves the dealership. This adage does not apply evenly across different automakers, models, and makes. A good way for consumers to choose between leases and purchases on vehicles is understanding the resale value on their favorite cars.

The standard tool for tracking car values over time is the Kelley Blue Book. This online tool allows drivers to look at the recommended resale price of their vehicles between the original release date and the present. A well-informed shopper may recognize that a new convertible may suffer greatly from age compared to a reliable SUV. This shopper can choose between leasing the convertible to cut down on disappointing sales years in the future and buying from a car manufacturer with a good history of high resale values.

Choosing Purchases And Leases Based On Manufacturer Discounts

One of the deciding factors between purchasing and leasing a new vehicle is the manufacturer discounts provided for each type of transaction. Car companies like Subaru utilize special rebates, reduced interest rates, and cash-back offers to attract customers. These attractive offers are separated between purchase and lease agreements, depending on the company's desire to get older models off the lot or to promote a limited run of new vehicles.

There are several common tools used by car companies to funnel consumers to purchase and lease agreements. Some companies run promotions using zero interest on financing agreements for a certain number of months to decrease the financial burden on new buyers. Other companies offer cash back and rebates which can be applied to the initial cost of the vehicle before financing agreements are implemented. There are other benefits including reduced monthly payments on leases and upgrades to options packages that can help consumers choose the right transaction type.

Upgrading Vehicles Through Leases

The purchase of a family sedan, minivan, or truck can be difficult for families with limited funds. One of the advantages of leasing a new vehicle is upgrading to a vehicle that would be out of a family's price range through purchasing agreements. Parents can choose minivans and SUVs with space for kids and supplies without committing to at least a decade with an expensive car.

Individuals without children can also upgrade from older vehicles with the help of auto leases. An older driver who wants a luxurious car to replace a more practical sedan can lease a convertible sports car without the high monthly payments of a purchase. It is important for individuals leasing luxury and sports cars to adhere to mileage limits set by the car company to avoid payments after the lease is complete.

Corporations can benefit greatly from leasing vehicles instead of investing in purchased trucks, cars, and utility vehicles. A company that wants to keep its fleet filled with new cars can work with a local dealership on a fleet lease agreement. It is important for companies leasing fleet vehicles to stagger their contracts to avoid keeping large portions of their fleet out of commission at the end of contracts.

Who Should Lease vs. Buy

Making the decision to purchase a new vehicle involves a lot of choices. First, you must decide if you want a car, truck, van, or SUV. Secondly, you must decide what's the most important to you, a comfortable vehicle, or one that is flashier. Thirdly, you have to decide how important are an automobile's safety, reliability, and fuel ratings. After you have decided on a type of vehicle, you are now ready to make a decision, lease vs. buy. The decision to lease vs. buy will vary depending on an individual's needs.

Options For The Professional

Consumers young and old who are in business, or who hold down highly respectable jobs such as doctors and lawyers, often use their automobiles as a way to project their professionalism. They generally drive newer model vehicles and only keep them for short periods of time. When it comes to the lease vs. buy question, most professionals choose to lease. Many large companies choose to lease vehicles for their employees to use as company cars. Additionally, these professionals may lease their own personal vehicles, as well. For those who like to drive the latest models and who can stay below the yearly mileage caps on leased vehicles, this option proves to be the best.

Options For The Family

Chances are if you have a house full of children, you will do a lot of driving. You can also guarantee that during your vehicle's life there will be a multitude of things spilled on the seats and in the floor. For the family, the choice of lease vs. buy is one of practicality. While leasing a vehicle might seem like the right choice for the family of four, most often purchasing a vehicle is a better investment.

If you have a highly active family who is involved in a lot of activities, you could quickly go above the mileage allowance for the year in only a few months. Going beyond these restrictions leads to additional charges that make leasing less cost effective for families. Choosing to buy allows families more freedom to do what they want without having to worry about keeping the vehicle in immaculate condition. Buying an automobile versus leasing one also means that if your credit is less than perfect, you won't have as much trouble finding financing.

Options For The City Driver

When you live in a city, it isn't always practical to use public transportation. Train stations aren't always close at hand; bus stations get crowded and can be dirty, especially in the rain. For those who live in the city, the lease vs. buy question is easier than most. While it may not seem practical initially, it may do you more good than harm to have a vehicle. It doesn't have to be the greatest car on the planet, but if you lease a car, at least you know that it will run. Leased vehicles are new, and are covered by the manufacturer's warranty. If most of your driving is done from the near-suburbs, or even if you live right downtown, owning a car can be a definite advantage. The convenience of having your own mode of transportation, and being able to get in and go at will is a liberating experience.

Of course, there are also practical matters to consider. It isn't always easy to get your groceries for the week, and try to pack them home on the bus or train. Mass transit systems don't typically provide storage for their passengers, and it's hard to carry a 20-pound turkey on your lap. You don't have to answer to anyone, and you don't have to stick to the typical bus route. You will certainly save time by sticking to your own schedule, instead of waiting for the next bus to get there. It is certainly more expensive to lease a car than it is to ride the bus or take the train, but the convenience makes it worth the expense. Rather than making a long-term investment with payments for the next three to five years, those living in the city can lease a vehicle and save thousands of dollars.

Options For The Retiree

You have spent the last 30 years driving second-rate vehicles, and now that you are retired, you have decided that it's time to purchase a dependable and reliable vehicle for those leisurely Sunday drives. Perhaps you have family all over the nation and want to spend time traveling to visit them. Of course, you are now faced with an option, lease vs. buy. For the retiree, either option may be preferable. It usually comes down to weighing the options.

The life of the retiree is generally thought to be one of leisure, but many find that their days and evenings are filled with events and gatherings that require them to travel. Some grandparents help their children out by providing transportation to baseball games and soccer practice for their grandchildren. For these retirees, the option to purchase might better suit their needs. Other retirees spend most of their time at home and don't do a lot of traveling. For these, the choice to lease makes more sense than buying a new vehicle, and in a few years they can return the lease and get something newer and better.

Ultimately, the choice of lease vs. buy is one that can be determined based on your lifestyle. Some things to consider before making the ultimate decision are: Do you travel more than 10,000-15,000 miles per year? Do you take good care of your vehicles? Do you have good enough credit to be considered for a lease? Are you willing to drive the same vehicle for several years, or do you want the newest model available?

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