LEASE OR FINANCE??
In today’s competitive economy, a vehicle is no longer considered a luxury anymore, but rather a necessity. There are not very many cities in the U.S. where you can live without car. I live in Orlando, Florida and dependable transportation is a mandatory expense. If you want to buy a new car, the cheapest way to buy a car is to pay cash for it. By paying cash you will avoid any finance charges. However, there are not very many people have thirty to fifty thousand dollars to spend on the vehicle. Lease or finance are two main options if you don’t have a lot of cash available to spend on the car. I have chosen the BMW and Infinity dealership to do my analysis. I picked two ...view middle of the document...
The price of the vehicle is $59,350. It’s approximately $1,596 for 39 months. The lease option is $679 per month for 39 months with an initial payment of $4,499 (includes $3,820 consumer down payment, $679 first month payment). Monthly payments total $26,481. At lease end, purchase for $31,930, plus $300 purchase option fee plus tax, or pay excess wear and tear plus $0.25 per mile for mileage over 10,000 miles per year. Lessee is responsible for maintenance and repairs. Infinity offered me to lower my down payment as well.
If you compare just monthly payments for financed car and lease car, the leased car has a definite preference. $699 for BMW and $679 for Infinity is way cheaper than $1,700 and $1,596. However, at the end of the 36 months for BMW and 39 months for Infinity, you will own the car if you financed and you will have nothing if you leased. I think this is the main disadvantage of the lease because there is no equity. It’s like paying rent on apartment in which your payments don’t go toward anything. Furthermore, another advantage of the lease on top of low down payment and lower monthly payments is you don’t pay full value of the vehicle, you don’t have full depreciation, and you pay sales taxes monthly. When you finance a car you pay the entire cost of the vehicle. Your down payment is considerably higher if you want to decrease your monthly payment. You pay sales taxes in full either by cash or rolling it into your loan. Also, you vehicle will depreciate (around $5,000) immediately after you drive out of dealership.
Another disadvantage of the lease option is that you don’t have flexibility. You will end up paying large penalties if you want out of the lease before the term is over. It can cost you a total of six months extra payments. If you finance car you have more flexibility.
Additionally, if you drive extra miles the lease company will charge you an extra 12-15 cents for each extra mile you drove. I was offered 12,000 miles at BMW and after some negotiating I got 17,000 miles at the Infinity dealership. If you have any damage to the car beyond the normal wear, you will have to pay for it as well. Lease option doesn’t allow you to upgrade the car, you can’t change stereo system, add GPS, or put fancy disks. If you finance the car you can upgrade and drive as much as you want.
Most of the leased vehicles also include GAP insurance on top of the regular insurance in case of accident or if the car gets stolen. The regular insurance will reimburse you only for the car’s market value and most likely will not cover what you still owe on the lease. For financed vehicle you don’t have to pay extra money for GAP insurance.
Leased vehicle has an easy turnover. If the car is in a good condition and your lease term is over, you can go to dealership and return your old one and drive out with a brand new vehicle and new lease agreement....