Many benefits exist for leasing or buying a new car, but possible lessees must stick to certain bank requirements and restrictions. If financing, none exist beyond your monthly payment responsibility. Both options can provide a low payment that fits your budget. Weigh the pros and cons of either purchasing option so you can decide which is right for you.
Benefits
The benefits of lending are obvious: making your payments results in your complete vehicle ownership at the end of the term. If you decide to lease, you can usually enjoy a lower monthly payment than a comparable finance, but without concern for future market values. Many lessees intend to walk away at the end of the term, which is usually around 36 months. Even if the vehicle depreciates a great deal, the bank assumes the resale penalties.
Restrcitions
For lessees, several restrictions apply. You cannot go over your contracted mileage without paying fees, which usually result in 10 to 18 cents-per-mile over the allowed mileage. You cannot return the vehicle at the end of the term needing repairs or with damages, as stated in your contract. Even if you find your car needs thousands in repairs (assuming the vehicle warranty does not cover repairs), you must fix the cars or will be billed by the bank upon return. Failure to pay results in negative credit reporting. For financing, you can do with your car as you please.
Term
General financing terms are 24 to 84 months, although you can usually pay off your car loan without concern for prepayment penalty fees. Leasing is generally most affordable at a term of 36 to 39 months. A 24-month lease is usually just as expensive as a comparable finance, while a longer term may find you out of the vehicle's warranty period, meaning you are responsible for vehicle repairs.
Warning
If you decide leasing is right for you, be careful not to pay too much toward your lease because you'll lose it all in the event of an accident or loss. Some consumers may be tempted to put thousands down toward a lease to substantially decrease the monthly payment, but doing so will not benefit you should a loss occur. Your leasing bank requires that it be listed as the loss payee on your full coverage insurance policy. Should the vehicle become a loss during a finance, you can receive payment for any amount due after the loan is paid off. For a lease, even if you paid the entire lease amount upfront, you will not receive any payment from the insurance company.
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