Auto Leasing vs. Buying a Car

There are many factors to consider when you take the decision whether to buy a car or to lease a car. Both leasing and buying have their good and bad sides and you are the one to decide which will be better for you.

This article will juxtapose auto leasing vs. auto buying and show you the similarities and differences between the two.

Ownership of the Automobile

Auto leasing:

When you lease, you don't own the vehicle you have leased. The ownership of the automobile usually belongs to the leasing company which lets you use the car over a specified period. At the end of that period you will have to either return the car or buy it.

Auto buying:

When you buy, you become the owner of the car.

Vehicle's Cost

Auto leasing:

When you lease, you don't pay the entire cost of the car. You pay only for what you "use up" while you are driving the car.

Auto buying:

When you buy, it doesn't matter how many miles you will drive your car - you just have to pay its entire cost.

Auto Payments

Auto leasing:

There are two types of charges that make up lease payments: a depreciation charge and a finance charge. The first one compensates the leasing company for the depreciation of the automobile's value during your lease term. The second one represents the interest on the lease company's money that is tied up in the vehicle while you are driving it.

Auto buying:

Two types of charges make up loan payments too: a principal charge and a finance charge. The first one covers the automobile's purchase price, while the second one represents the auto loan interest.

Condition and Mileage

Auto leasing:

When you lease, you need to be ready to face limits on the number of miles you can drive the car and its wear during the lease term. The reason for this is that auto leases are based around the assumption that at the end of the lease term the leased automobile will have a certain predicted resale value. And the resale value is directly related to the car condition and mileage. If you return you vehicle damaged or in poor condition, or if you have exceeded the predetermined mileage limit, you will have to pay charges for the extra value depreciation.

Auto buying:

When you buy a car, it doesn't matter whether you maintain your car regularly, drive it a lot or make modifications to it. It is your vehicle and you can do whatever you want to it. However, keep in mind that higher mileage or poor condition will lower your car's resale value and cause you headaches when you decide to trade it in.

End of Term

Auto leasing:

At the end of the lease term you may have the options to buy the car you have leased, to lease another automobile, or just end your lease.

Auto buying:

At the end of the auto loan term you just stop making the monthly car payments and enjoy the ownership of your vehicle.

The auto loan calculators and the information available on this site are intended to serve only as general guidance regarding auto loans. Since they do not take into account your individual circumstances, we cannot and do no guarantee their accuracy or suitability to a specific purpose. We highly recommend you to consider the appropriateness of any information to your objectives before acting on it, and encourage you to consult a qualified professional regarding you particular personal situation.

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