If you’re in the market for a car in Ohio, there are many variables to consider, from make and model to new or used to buying versus leasing. Taking the time to understand all the pros and cons will help you find the solution that’s best for you. While leasing a car can be an appealing option, it’s not as simple as paying a few hundred dollars a month to “rent” a new car for a couple years. Let’s explore some common questions people have about leasing versus buying a car. In the end, you may decide that coming to KEMBA Financial Credit Union and applying for an auto loan is the best financial move for you. Let’s explore some common questions people have about leasing versus buying a car.
Leasing has become increasingly popular in the U.S. In fact, in 2021, one in four new vehicles was under lease. Many people choose to lease a car because this can make nicer vehicles more affordable, and any mechanical problems they encounter during the lease period will likely be covered by the manufacturer’s warranty.
The initial cost of leasing a car tends to be lower. Some dealers collect only a security deposit and the first month’s lease payment when the deal is signed. However, other dealers require several thousand dollars in down payments. It’s important to read the fine print in all those dealer promotions so you can fully understand what your costs will be.
Are monthly payments lower for leased cars?
Generally, the monthly payments for leasing a car are lower than they would be with an auto loan. How can dealers afford to do this? It’s simple — when your lease is up, the dealer gets the car back and can lease it again or sell it.
Generally, the monthly payments for leasing a car are lower than they would be with an auto loan. How can dealers afford to do this? It’s simple — when your lease is up, the dealer gets the car back and can lease it again or sell it.
What’s the biggest disadvantage of leasing?
While leasing a car in Ohio can be appealing, it’s not always the smartest financial investment. At the end of the lease period, the lessee returns the car to the dealer and has nothing tangible to show for the years of lease payments. In contrast, if you buy a vehicle and pay it off through a car loan, the title is transferred to you once the car is paid off. Additionally, you will likely be able to drive the car for many more years without having monthly payments.
While leasing a car in Ohio can be appealing, it’s not always the smartest financial investment. At the end of the lease period, the lessee returns the car to the dealer and has nothing tangible to show for the years of lease payments. In contrast, if you buy a vehicle and pay it off through a car loan, the title is transferred to you once the car is paid off. Additionally, you will likely be able to drive the car for many more years without having monthly payments.
Can you negotiate the price of a leased car?
Leasing terms are based on a vehicle’s value, so if you want a low lease price, you’ll need to haggle with a dealer. Beware of hidden dealer fees as well. These can be a factor when both buying and leasing a car. Be sure to ask about “acquisition fees” and “disposition fees” so you understand the full cost.
Leasing terms are based on a vehicle’s value, so if you want a low lease price, you’ll need to haggle with a dealer. Beware of hidden dealer fees as well. These can be a factor when both buying and leasing a car. Be sure to ask about “acquisition fees” and “disposition fees” so you understand the full cost.
What else can drive up leasing costs?
Most agreements put strict limits on the miles driven per year, often 10,000 or 12,000 annually. If you go over the limit, you’ll be charged up to 25 cents a mile. You’ll also be charged at the end of your lease term for any dents, pet stains or other upholstery marks. The dealer will deduct repair costs from the security deposit you put down when you signed the lease.
Most agreements put strict limits on the miles driven per year, often 10,000 or 12,000 annually. If you go over the limit, you’ll be charged up to 25 cents a mile. You’ll also be charged at the end of your lease term for any dents, pet stains or other upholstery marks. The dealer will deduct repair costs from the security deposit you put down when you signed the lease.
Are any other payments owed at the end of a lease?
When your lease ends, there are often other payments that may be owed to the dealer. It’s important to understand the concept of “residual value” when researching car leases. Simply put, when a consumer drives a car for several years, it loses some of its original value. The remaining value at the end of the lease is the car’s residual value. The dealer makes a profit by collecting more money from the consumer than the leased vehicle loses in value. One way dealers try to ensure residual value is by requiring a lump sum payment at the end of the lease. Be sure to check the terms of any lease you are considering so you can take this into account.
When your lease ends, there are often other payments that may be owed to the dealer. It’s important to understand the concept of “residual value” when researching car leases. Simply put, when a consumer drives a car for several years, it loses some of its original value. The remaining value at the end of the lease is the car’s residual value. The dealer makes a profit by collecting more money from the consumer than the leased vehicle loses in value. One way dealers try to ensure residual value is by requiring a lump sum payment at the end of the lease. Be sure to check the terms of any lease you are considering so you can take this into account.
Do credit scores matter when leasing a car?
Credit scores still matter when leasing a car. Just as it might be a challenge for someone with poor credit to get a car loan, a dealer might turn away a similar person looking to lease a car or charge higher fees on the lease. However, some dealerships have lease-to-own-car programs for consumers with financial challenges. The initial lease has no down payment and modest monthly payments. If the consumer makes those payments on time for a certain period, usually about two years, the transaction converts to a sale. But dealers often have zero-tolerance rules, sometimes voiding leases after the first missed payment. It’s important to note that many financial institutions, including KEMBA have similar loan programs for first-time car buyers or those with financial challenges.
Credit scores still matter when leasing a car. Just as it might be a challenge for someone with poor credit to get a car loan, a dealer might turn away a similar person looking to lease a car or charge higher fees on the lease. However, some dealerships have lease-to-own-car programs for consumers with financial challenges. The initial lease has no down payment and modest monthly payments. If the consumer makes those payments on time for a certain period, usually about two years, the transaction converts to a sale. But dealers often have zero-tolerance rules, sometimes voiding leases after the first missed payment. It’s important to note that many financial institutions, including KEMBA have similar loan programs for first-time car buyers or those with financial challenges.
Can you buy a leased car after the initial lease expires?
When a lease expires, you can certainly choose to buy the car rather than return it to the dealer. Provisions for buying the car at the conclusion of the lease are usually included in the initial lease agreement. However, experts say it’s generally more expensive to buy the leased vehicle than a similar used vehicle.
When a lease expires, you can certainly choose to buy the car rather than return it to the dealer. Provisions for buying the car at the conclusion of the lease are usually included in the initial lease agreement. However, experts say it’s generally more expensive to buy the leased vehicle than a similar used vehicle.
How can I compare the cost of leasing vs. buying?
According to Edmunds, the most cost-effective solution is generally to buy a used car, pay it off and drive it for a few years. If a low monthly payment is important, however, and you can reasonably stay within the mileage limit, leasing could be a viable option. Edmunds estimates the average SUV to have a monthly lease payment of $356, compared to $456 when bought new and $336 when bought used. When interest rates and additional fees are considered, the leased car would cost a total of $29,412, the new car would cost $32,830 and the used car would cost $24,188.
According to Edmunds, the most cost-effective solution is generally to buy a used car, pay it off and drive it for a few years. If a low monthly payment is important, however, and you can reasonably stay within the mileage limit, leasing could be a viable option. Edmunds estimates the average SUV to have a monthly lease payment of $356, compared to $456 when bought new and $336 when bought used. When interest rates and additional fees are considered, the leased car would cost a total of $29,412, the new car would cost $32,830 and the used car would cost $24,188.
It all comes down to a couple factors: whether you’re looking for a shorter-term or longer-term investment and what you can comfortably afford both now and in the future.
Despite what TV ads or a local car dealership might tell you, there’s nothing simple about leasing a vehicle. After evaluating your options, if you determine that buying a car is a smarter move for you, KEMBA Financial Credit Union can give you some straightforward information on how to get behind the wheel.