Lease or Purchase

When buying a car, the question often arises about whether it is better to lease or to buy.   First, you must understand that leasing a car is not the same as buying o­ne. When you buy, you own the car. When you lease, you pay to drive someone else's vehicle. Leasing can involve lower monthly payments than the payments for a loan o­n a purchased vehicle. However, at lease end, you will have no ownership or equity in the car.   Before you decide whether to lease or buy, educate yourself o­n the pros and cons of and difference between leasing and buying.    Go to someone you trust that is knowlegeble o­n the subject of leasing vs. buying a can, and ask questions.

If you're thinking of leasing, consider the following:

1. Expect to negotiate the same fair price and terms as you would when buying a car. Lowering the lease price will help reduce your monthly payments. Get the terms of the lease agreement in writing.

2.   Become familiar with the following leasing terms:

•  In a closed-end lease , you return the car at the end of the lease and "walk away," but you're still usually responsible for certain end-of-lease charges, such as excess mileage, wear and tear, and disposition.

•  In an open-end lease , you pay the difference between the value stated in your contract and the lessor's appraised value at the end of the lease.
 

•  Lease inception fees are payments you must make when the lease starts, and may include a down payment, security deposit, acquisition fee, first month's payment, taxes and title fees. Ask for a list of all charges due at lease inception. You may be able to negotiate some or all of the terms.
 

•  The capitalized cost is the price of the car for leasing purposes plus taxes and extra charges like service contracts and registration fees.
 

•  The capitalized cost reduction is similar to a down payment. If you're trading in a car, make sure the dealer applies the trade-in value to the price your lease is based o­n. The trade-in credit may reduce your down payment or monthly payments.

3.    Check if additional fees apply to the amount of mileage, wear and tear, or early return.   There may be penalties for any damages to the interior or exterior of the car, even minor o­nes.   Also, expect to pay a substantial charge if you give the car up before the end of your lease.

4. Verify that the manufacturer's warranty covers the entire lease term and the approximate number of miles you will drive.

5. “Gap Insurance” which covers the difference between what you owe o­n the lease and what the car is worth if it's stolen or totaled in an accident may be a good investment.

6. Take a copy of the contract home and review it carefully away from any dealer pressure.    Look specifically for charges that were not disclosed at the dealership.

Asking questions and considering the above possibilities can significantly influence whether you choose to lease or buy a car.     Look at all the facts and decide what is right for you.