Lease vs. Purchase: What You Should Know When Acquiring a Family Vehicle

By Rich Schaeffer

Over the past few years, the popularity of leasing an automobile has continued to grow. In fact, as many as one in three individuals now choose to lease a vehicle rather than purchase one.

Why has leasing become so popular?


The initial cost and monthly lease payments on a leased vehicle tend to be much less than the initial costs and monthly loan payments for the exact same purchased vehicle. However, overall, does that mean that leasing a vehicle is a better idea than purchasing one? The following is a comparison on the most important points of how leasing (under the common close-end type lease) stacks up against purchasing:


Ownership


• Purchasing – At the end of the loan term, you own the vehicle and can continue to use it.


• Leasing – At the end of the lease term, you don’t own anything and must either purchase a vehicle or lease a new one.


 


Up-Front Costs


• Purchasing – Down payment, plus taxes, registration and other fees.


• Leasing – First month’s payment, refundable security deposit, capitalized cost reduction (similar to a down payment), taxes, registration and other fees. (As noted, up-front lease costs are usually much less than up-front purchase costs.)


Monthly Payments


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