Lease or Buy?
Posted in Drive Train on January 30, 2017
Lease? Or buy? These are the options for Commerce drivers. It's always a tough question for auto owners, but here is some info that'll help you make an informed decision.
If you buy, you'll pay the full cost of the car, with maybe an initial down payment, then monthly payments on the balance that pays down the loan principal, and the finance charge.
Commerce drivers who lease, finance the portion of the cost of the car that's used up during the term of the lease. You'll pay some money up front; fees, security deposit, first month's payment and maybe a capital reduction. The monthly payments include a depreciation cost and a finance charge. When the lease is up, you return the car to your local Commerce area dealership.
So how do Commerce drivers decide?
First, how much do you have for a down payment? A lease usually requires a smaller down.
How much monthly payment can you afford? Again, lease payments will be much lower for any given down payment.
A lease needs requires better credit, so that's a factor.
How long will you keep the car? Commerce drivers who keep their cars around for a while will pay less if they buy. But just two or three years? Then leasing is the way to go.
If your car might suffer a ding or two, like, say a work truck would, then buying's better. The auto leasing company will want their vehicle back at the lease end in tip top shape, and if repairs are needed, you'll pay.
How many miles do you drive in and around the Commerce area? Important to consider because leases have a mileage limit, and if you go over, you pay a hefty charge per mile when the lease is up. So high mileage Michigan drivers should definitely buy.
Will the car be used in your business? Check with your accountant, but both financing options have different tax benefits, depending on your circumstances.
Over the short term, leasing is much cheaper. Medium term, leasing and buying costs are about the same. Over the long haul, leasing always costs more.
Leases may sound a bit complicated, and the typical lease decision weighs more on the monthly payment, rather than price. So sometimes Commerce leasers may pay on a higher purchase price than a buyer would.
Here is a tip: If the salesman asks if you'll be leasing or buying, say you're not sure yet. Make your best deal, then look at your financing options.
Here's another: With a buy or a lease, if you total the car, you'll owe the full amount of the loan, or the balance of the lease payments, and usually, it's less than the car's fair market value – and that's all your Michigan auto insurance company will pay. But ask your Commerce agent about gap insurance, which pays the difference between fair market value and what you owe. Big consideration for a lease.
Remember, you have to return your leased vehicle in excellent condition, and may need to do all the vehicle manufacturer's recommended service and maintenance, or face penalties. So see your local advisor at your Commerce auto repair shop or Top Lube Center on a regular basis, get the required work done and save the service records. It's well worth it.