Financing vs. Leasing


The Difference Between Buying & Leasing


With a purchase, you pay for the entire cost of the vehicle, regardless of how many miles you drive each year. You typically make a down payment, pay sales taxes in cash, and pay an interest rate determined by the loan company, based on your credit history. 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 value.


When you lease, you pay for only a portion of a vehicle's cost, which is the part that you "use up" during the time you're driving it. Sometimes, 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 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.


When making a 'lease or buy' decision, you must look not only at financial comparisons but also at your own personal priorities - what's important to you.


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