Buying vs. Leasing your next GMC Vehicle
It's a common dilemma with auto customers today: leasing vs. buying. To help you with the process we have provided information below for both choices. We hope you find this information helpful when it comes to your next GMC vehicle. Call us here at Coffman GMC for more details or fill out the quick form below and we will get right back to you.
Lease versus Buy
The answer is - it depends. It's not possible to simply say that one is always better than the other because the answer depends on the specifics of each individual situation.
Leases and purchase loans are simply two different methods of automobile financing - leasing is not renting as many people seem to think. Leasing finances the use of a vehicle; buying with a loan finances the purchase of a vehicle. Each has its own benefits and drawbacks.
When making a 'lease or buy' decision you must look not only at financial comparisons but also at your own person priorities - what's important to you.
Is having a new vehicle every two or three years with no major repair risks more important than long-term cost? Or are long term cost savings more important than lower monthly payments? Is having some ownership in your vehicle more important than low up-front costs and no down payment? Is it important to you to pay off your vehicle and be debt-free for a while, ten if it means higher monthly payments for the first few years?
So we find that making a lease-or-buy decision is not quite cut and dry. There are trade-offs, pluses and minuses, pros and cons to consider.
Buying and Leasing are different
When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it or how long you keep it. Monthly payments are higher than for leasing. You typically make a down payment, pay sales taxes in cash or roll them into your loan, and pay an interest rate determined by your loan company based on your credit score. You make your first payment a month after you sign your contract. Later, you may decide to sell or trade the vehicle for its depreciated resale or trade value.
When you lease, you pay only a portion of a vehicle's cost, which is the part that you "use up" during the time you're driving it. Leasing is a form of financing and is not the same as renting. You have the option of not making a down payment, you pay sales tax only on your monthly payments (in most states), and you pay a financial rate, called money factor, that is similar to the interest on a loan. You may also be required to pay fees and possibly a security deposit the that you don't pay when you buy. You make your first payment at the time you sign your contract - for the month ahead. At lease-end, you may either return the vehicle, or purchase it for its depreciated resale value. You may be charged a lease-end disposition fee.
Short Term Vs. Long Term and what are the average payment differences?
- The short-term monthly cost of leasing is ALWAYS SIGNIFICANTLY LESS than the cost of buying. For the same car, same price, same term, and same down payment, monthly lease payments will always be 30%-60% lower than loan payments.
- The medium-term cost of leasing is ABOUT THE SAME as the cost of buying, assuming the buyer sells/trades his vehicle at loan-end and the leaser returns her vehicle at lease-end.
- The long-term cost of leasing is ALWAYS MORE than the cost of buying assuming the buyer keeps his vehicle after loan-end.
Lease or Buy? What's important to You?
What Are Your Priorities?
It's personal. All of us have different personal styles, objectives, and priorities - in cars, life and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priorities in mind. What's right for one person can be totally wrong for another.
LEASE - If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should lease.
BUY - If you don't mind higher monthly payments at first, like holding on to your cars, prefer to build up some trade-in or resale value (equity), enjoy the idea of having ownership of your car, like paying off your loan and being payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, might have lifestyle or job changes in the near future, and don't like the risk of possible lease-end charges - then you should buy.