Leasing a vehicle offers several benefits to buyers who can maintain a somewhat restrictive contract. Leasing requires a yearly mileage allowance, specific term, possible penalty fees and maintenance requirements. If you can't fulfill those contract requirements, however, then a finance or cash purchase may offer benefits over a lease.
Ownership
If you are financing or purchasing a vehicle, you can expect to own it immediately or at the end of your loan term. When leasing, the leasing bank owns the vehicle, not you. Rules and requirements over a lease affect how you can use your vehicle, as mileage limitations and repair or maintenance requirements can limit your vehicle use. If you are financing, you can pay off your vehicle early to own it sooner. When leasing, you can pay your lease amount upfront but will not be able to take advantage of your vehicle's equity. When you return the leased vehicle, the bank will sell it and keep any profit from its sale.
Price
At first glance, leasing appears cheaper than purchasing because of comparable monthly payments. If you plan to purchase your leased vehicle at the end of its contract, leasing may prove more expensive than a purchase or finance. Compare overall prices before you determine whether to lease or buy. Leasing often includes a down payment of several thousand dollars and lack of rebates or price negotiations. A vehicle purchase, whether your finance or pay cash, is often less money because of available rebates and price discounts.
Restrictions
Your life situation can change over the term of your lease. If you find that you have to commute farther to work or increase your driving habits for other reasons, you might face over-mileage fees of 10 to 20 cents per mile over your contracted allowance. If you are purchasing, you can drive your car as much as you'd like. Leasing also requires that you consistently repair and maintain you vehicle; otherwise, expect a bill for necessary repairs or maintenance once you return the vehicle, also known as wear-and-tear fees.
Insurance Benefits
Expect to maintain a full-coverage policy during the term of your loan or lease with increased bodily injury and property damage limits and a lower deductible. For leasing, you likely need to purchase an additional gap insurance policy, which ensures vehicle value payoff to the leasing bank. If you total your vehicle during a loan, you'll receive your insurance company's market-value payout if it exceeds your loan payoff amount. Even if you pay all of your lease payments upfront, you won't receive any money back if your vehicle becomes a loss since the vehicle's owner is the bank and your insurance policy's loss-payee.
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