Auto Buying Advice

Generally, you have three choices when deciding how to pay for a new car:
  • You can pay for it in full (buying).
  • You can finance it (pay for it over time) with a loan (buying).
  • You can make monthly payments for the car's use without owning it (leasing).
The following information compares the differences between buying and leasing:

Note: This chart is for a closed-end lease, the most common type of vehicle lease. With a closed-end lease, you may return the vehicle at the end of the lease term, pay any end-of-lease costs, and walk away.

Ownership
LEASING: You do not own the vehicle. You get to use it but you must return it at the end of the lease unless you choose to buy it.
BUYING: You own the vehicle and get to keep it at the end of the financing term.



Monthly Payments
LEASING: Monthly lease payments are usually lower than monthly loan payments because you are paying only for the vehicle's depreciation during the lease term, plus rent charges (like interest), taxes, and fees.
BUYING: Monthly loan payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.



Up-front Costs
LEASING: Up-front costs may include the first month's payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration, and other fees and charges.
BUYING: Up-front costs include the cash price or a down payment, taxes, registration, and other fees and charges.



Early Termination
LEASING: You are responsible for any early termination charges if you end the lease early.
BUYING: You are responsible for any pay-off amount if you end the loan early.



Vehicle Return
LEASING: You may return the vehicle at lease end, pay any end-of-lease costs, and "walk away."
BUYING: You may have to sell or trade the vehicle when you decide you want a different vehicle.



Future Value
LEASING: The lessor (not you) has the risk of the future market value of the vehicle.
BUYING: You have the risk of the vehicle's market value when you trade or sell it.



Mileage
LEASING: Most leases limit the number of miles you may drive (often 12,000-15,000 per year). You can negotiate a higher mileage limit and pay a higher monthly payment. You will most likely have to pay charges for exceeding those limits if you return the vehicle.
BUYING:You may drive as many miles as you want, but higher mileage will lower the vehicle's trade-in or resale value.



Excess Wear
LEASING: Most leases limit wear to the vehicle during the lease term. You will most likely have to pay extra charges for exceeding those limits if you return the vehicle.
BUYING: There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle's trade-in or resale value.



End of Term
LEASING: At the end of the lease (typically 2-4 years), you may have a new payment either to finance the purchase of the existing vehicle or to lease another vehicle.
BUYING: At the end of the loan term (typically 4-6 years), you have no further loan payments.
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