Leasing a vehicle requires you to pay for a term specified in the leasing contract for which you plan to drive the vehicle, subjecting you to mileage and term restrictions. If financing, you own the car and pay for the total price of the vehicle. Learn the benefits of leasing compared with financing.
Payment
Leasing is usually cheaper than financing. The bank purchases the vehicle from the dealership and leases it to you for around half of the vehicle's cost. The bank assumes the vehicle's future market value, which is what the bank hopes the car can sell for in the future. Because you are only paying for some of the car's cost, you can expect a significant monthly payment discount compared with financing. If you compare a 36-month lease to what you pay during 36 months of a longer term finance, the amount required down and the amount you pay over time is less if you lease.
Future Market Values
If you finance a new car and do not plan to keep it for the duration of the finance, it might be difficult to trade it in or sell it on your own because of future market values. In a lease, the bank assumes the future market value, and if the projected value is incorrect, the bank loses money, not you. Economy, gas prices and manufacturer issues, such as a discontinued model or recalls, can affect your vehicle's resale value. Had you financed instead of leased under these conditions, you could lose money or have to keep a car you don't want until its equity levels with its value.
Options
If you lease, you might be able to add extra options to your vehicle that you normally could not afford. Often, you can enjoy driving a better version of the model you choose or add more options, such as leather seating, a DVD player or a sunroof.
Warranty and Repairs
Most lease terms run for up to 39 months. So, it is likely you can enjoy a bumper-to-bumper warranty the entire time of your lease. In fact, you should lease during a time that the vehicle is under warranty, because you are responsible for all vehicle repairs before turning in a lease. Some manufacturers also offer a free maintenance package for one to three years. If you finance a vehicle and keep it for longer than three years, your out-of-pocket expenses to maintain and repair your car can add up. Leasing allows you to drive a vehicle under warranty and bring it back when the warranty is up, which allows for peace of mind.
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