What is the different between purchasing snd leasing of a car?

Question

What is the different between purchasing snd leasing of a car?

Answer 1

Leasing can be good for the right people.

Essentially, in a lease, you never "own" the car. You make payments for 2-3 years, then hand the car back. Think about it almost like a long-term rental.

There are some advantages to leasing under the right circumstances.

First, if you trade out of cars every 2-3 years, it might be right for you. In a lease, you have a contract for a fixed amount of time. I discourage leasing past 3yrs - 2 is better. In a 'loan', after 2 yrs, if you try to trade you will probably be upside down, and owe more than the car is worth. So, in order to get out of it, you have to have a lot of cash, or finance that negative on the next car.

The contract will tell you that your payments are $x per month plus tax. At the end of the term, you will have a residual value for the car. The lease company basically says "In three years, we feel this car will be worth $Y" You have the option to buy the car at the end of the lease for that amount. If you are in love with the car, or it is worth well above the residual, you may want to consider that. However, in most cases, you simply hand over the keys and walk away.

In a lease, there is a specified amount of mileage. Most leases are constructed around 12K or 15K miles per year. If you go over the mileage, there will be a per-mile penalty at the end of the lease. So, if you drive a lot, it may not be for you.

Leasing typically allows a person to get a nicer car for the same payment as a lower-end car on a loan. that is because of that residual. You are only "financing" the difference between sales price and residual. In a loan, you are financing the entire purchase price.

In other words, if a car has a sale price of $25,000. on a three year lease, lets say the residual is $12,500. You are only "financing" $12,500 for 3 yrs. If you were to buy that same car, you would finance $25,000 either for a longer term, or a much higher 36 month payment.

Lastly, in a lease you pay less sales tax. In a conventional purchase on that $25k car, you pay tax on the whole 25,000. In a lease, you pay sales tax on the monthly payment. In other words, your payment of $300/month is actually $300+sales tax. BUT you are only paying tax on the leased amount - in the earlier example you are only paying sales tax on $12,500.

Times leasing is good: You trade cars ever few years, you dont drive more than 12-15k per year, you want to put less down

Times it is bad: You like to keep cars a long time, you drive a lot, you want to put a lot of cash down.

Hope that helped some

Answer 2

leasing is a good dealer if you for a fact know you want a car every two or three years. If you decide to own a car this way you will never have negative equity. Just follow the guide lines. If you purchase a car and want long term financing for a lower payment and know your trading in two or three years, you will always have negative equity. No one ever own their car till its paid for. young car buyer can benefit fROM leasing. just lease the right new car.

Answer 3

Well the biggest difference is that when you purchase the car, YOU GET TO KEEP IT.

Leasing a car is basicly an extended rental. You pay for the use of the car for a period of time, you pay to gas up the car, and if you go over a set number of miles you pay extra.

When you lease, you pay for the devaluation of the car. When you turn the car back in, the leasing company doesn’t lose money on you. If you take a $30,000 car and put 50,000 miles on it, you’re eating $10,000 or $15,000 somewhere, especially if you are over the allotted mileage.

As far as the economic side goes, a car is a DEPRECIATING asset...that means it is going down in value all the time.   You can depreciate the car based on miles, or straight-line depreciation, either way it is going down in value the minute you drive it off the lot.   The only way you can get your money out of the car is to purchase it, take good care of it, and keep it going for as long as possible.

Answer 4

Unless you are wealthy and judging by your question, chances are you are not. (Otherwise you'd be well acquainted with the difference between leasing and purchasing) your best option would be to buy a car. When you lease a car, you can olnly drive 12,000 miles per year on average and then you get charged PER MILE!! not to mention wear and tear, luxury tax etc. So do the right thing and buy a car that you can afford, taking into consideration insurance, maintenance, repairs, fuel efficiency etc. Don't be like those idiots who buy cars they can't afford and then suffer the humiliation of having the car repoed from their wokrplace in front of their coworkers...... Peace out Homey!!

Answer 5

purchasing, you own the car. if you take an auto loan, your payments will generally be higher.

leasing, your payments are generally lower since you contract to lease the car for a certain amount of months and a large amount of a buy back as the final payment or you turn the car in (less wear/tear).

Answer 6

Purchasing means you make payments and the vehicle is yours. Leasing means you make payments and  it is like renting it is not really yours but you may have an option at the end to buy  the vehicle at fair market price and if you don't then the vehicle and all the money you have paid on it are gone.

Answer 7

leasing is like renting an apartment.

purchasing is like buying a house.

at the end of a lease you own nothing.

Answer 8

I actually like leasing.  I figure if you are going to paying a car payment always you may as well lease.

It just depends on your attitude towards paying off a car vs getting a new car every 2-3 years.