To Lease or finance? That is the question

This is a question that sometimes baffles people and for others it is pretty straightforward. For the people who don’t understand the pros and cons of each option, I will lay it out in hopes that it will now be clear.

You should lease if:

a) You get tired of things after 2 or 3 years.

b) You do not want to pay the same monthly payment 4, 5 or 6 years in when the car has already depreciated by half its value.

c) You like piece of mind.

d) You like low monthly payments.

e) You always want the latest and greatest toys/models.

f) You like to put $0 or next to nothing down.

You should finance if:

a) You like to own things.

b) You would like no payments at the end of the finance term (usually 5 to 6 years)

c) Your payments are about 40–60% higher but you own the vehicle at the end of the term.

d) You like to modify your vehicle.

There are some other things to look at when deciding.

If you want low monthly payments but also want to own your vehicle. You could always lease the vehicle for 2 or 3 years and then buy it out at the end of the lease.

The residual value of the car will be about 30 to 40% less. Now you can finance the rest of the remaining cost of the vehicle for much less. Let’s look at an example.

Negotiated price of car after tax = $40,000

Manufactures estimated residual value (what the car is worth after lease term) = $25,000

Monthly lease amount (not including the money factor or APR) = 40,000–25,000 = $15,000. $15,000 over 36 months = $416 a month

Buy out at the end of 3 years = $25,000. So finance $25,000 over 5 years (not including interest = $416 a month

VS.

$40,000 car financed for a typical finance length of 5 years = $667 a month

Yes! All said and done you are essentially paying the same amount of money for the car over the term of your deal. However, $667 is not doable for a lot of people. That’s why this option is the best if you are someone who wants to own the car.

There are of course other things to consider like what exactly is covered via warranties and whether the dealership is offering incentives on leasing or financing but this is most of it in a nut shell. This bit of info will help you 100%.

If you are in the market for a new car or know someone who is and need help, please feel free to email me at msgamba1@gmail.com or call me directly at 845–728–6287.