8 questions that will help you decide what’s right for you.
Should you lease or purchase your next vehicle? Both options have advantages and disadvantages, but there are different costs, restrictions and requirements between the two options. The biggest difference between leasing and purchasing a vehicle is when you buy a vehicle you’re paying to own the vehicle. When you lease a vehicle, you’re paying to drive the vehicle for a certain amount of time.
- Do You Want Lower Monthly Payments?
- How Important Is Convenience?
- Do You Maintain Your Car?
- How Far Do You Want To Go?
- Would You Need To Terminate Early?
- Do You Like Change?
- Do You Have A Vehicle To Trade In?
- How Will You Use The Vehicle?
Generally, your lease payments are lower than loan payments because you’re only making payments on the depreciated portion of the vehicle you’re driving during the lease agreement. Loan payments must cover the entire purchase price of the vehicle. In addition, you may have a lower down payment when you lease.
There also may be tax advantages to leasing. (Check with an attorney or tax consultant on the deductibility options available for your situation.) Essentially you only pay tax on the amount of vehicle you use. For a three-year lease, you only pay sales tax for the 36 months that you’re using the vehicle. If you purchased the vehicle outright, you’d pay sales tax for the entire purchase price.
When the lease expires, you may have several options – you can return the vehicle, you can purchase the vehicle or you can lease another vehicle. Each option has advantages and disadvantages depending on your specific circumstances. Return the vehicle and you might have to pay additional charges if you haven’t properly maintained the vehicle. Buying the vehicle at lease end may be more expensive than purchasing the vehicle in the very beginning. Leasing another vehicle is usually the best option, but you still need to come up with additional funds to start another lease.