If you're in the market for a new vehicle, you need to decide whether to lease or buy it. The team at Koons Clarksville Chevrolet Buick GMC is here to help you understand the difference between leasing versus buying your next car before you start shopping around for a new vehicle.

What Does Leasing a Vehicle Mean?

When you lease a vehicle, it's a lot like an extended rental agreement. You essentially borrow the vehicle for a specific term from the dealership in exchange for a monthly payment . When leasing, there's a limit to the number of miles you can put on the vehicle and you sign an agreement regarding maintenance and repairs. At the end of your lease term, you'll need to return the vehicle or agree to purchase it to keep driving it.

You can calculate the monthly payment for a lease based on the expected vehicle depreciation over your lease term plus interest and fees. Your lease agreement will include the following information:

  • Your monthly payment.
  • The length of the lease term.
  • The current value of the vehicle.
  • The anticipated depreciated value of the vehicle.
  • Any fees added on top of the lease.
  • Rent charge, money factor, or lease interest rate.
  • Early termination fees or penalties.
  • Penalties for missed or late payments.
  • Definition of normal wear and tear and fees associated with excessive wear and tear.
  • Mileage limit.
  • Per mile fee for miles overage.

You need a minimum credit score of 700 to qualify for a vehicle lease. If your credit score exceeds 700, it may help reduce your monthly payment by qualifying you for lower interest rates. If your credit score is less than 700, you may still qualify for a lease from some dealerships, but you should be prepared to pay higher interest rates and fees.

Lease Advantages

Leased vehicles can offer many advantages, depending on how you use your vehicle. These advantages include:

  • Lower monthly payments : Lease payments tend to be lower than traditional vehicle financing.
  • A lower down payment : A lease usually requires less money upfront.
  • More trim options : Leasing may let you select the top trim level, with high-end features and extras, for less than what it would cost to purchase the same trim level.
  • Newer models : Leasing lets you drive the latest model year without the high cost of purchasing it.
  • Warranty coverage : A leased vehicle falls under the original warranty from the manufacturer.
  • No commitment : When your lease expires, you're under no obligation to try to trade or sell the vehicle if you no longer want to drive it.

Lease Disadvantages

Leasing a vehicle does have a few disadvantages, and there are instances where it may not be the best option for your needs. These disadvantages include:

  • Higher overall cost : Leasing a vehicle can end up costing more in the long run because, at the end of your lease, you have nothing to show for the payments you made.
  • Depreciation loss : Most of the depreciation value of a vehicle occurs when you first start driving it, which is the part of the depreciation you pay when you lease.
  • Difficulty breaking the lease : If you need to break your lease, you may find doing so difficult and expensive.
  • No customizations : Since you don't own the vehicle, you're not allowed to customize it, and doing so runs the risk of penalty fees.
  • No vehicle : You no longer have a vehicle to drive when your lease is up.

What Does Purchasing a Vehicle Involve?

You can purchase a vehicle with cash outright or by financing an auto loan through your financial institution or with our Koons dealership . Most auto loans require a down payment of either a trade-in vehicle or cash applied toward the new vehicle price. If you finance your vehicle, you agree to make monthly payments for a specified term to cover the cost plus interest. Either way, once you've paid the loan in full, you own the vehicle and can either keep it or trade it in for a newer vehicle.

Your credit score will affect your interest rate, with higher scores getting lower rate offers. A lower interest rate decreases your monthly payment and the total amount repaid. An auto loan usually runs between 24 and 84 months, depending on the vehicle's age. Shorter loan terms usually attract lower interest rates, saving you money.

Purchasing Advantages

The advantages of purchasing a vehicle reflect the disadvantages of leasing. They include:

  • The vehicle is an asset : When you buy a vehicle outright or pay off an auto loan, you own the vehicle as an asset.
  • No mileage limit : You can drive as far as you want in your vehicle without penalty fees.
  • Customization options : You can make your vehicle your own with as many changes, upgrades, and customizations as you want.

Purchasing Disadvantages

Just as with leasing, purchasing a vehicle can also have disadvantages. These include:

  • Higher monthly payments : The monthly payments on auto loans are usually higher than those associated with leasing a vehicle.
  • Higher down payment : Your financial institution may require a larger down payment on a vehicle loan than you'd need for a leased vehicle.
  • Priced out of trims : You may not be able to afford the price tag associated with the top-of-the-line trim levels when purchasing a vehicle.
  • Older models : When purchasing a vehicle, the newest model year may be beyond your budget, forcing you to buy an older pre-owned vehicle.
  • No warranty : If buying a pre-owned vehicle, it may not have any warranty remaining, so you either need to go without or purchase an extended warranty to cover maintenance or repairs.

Is Leasing or Buying Best?

If you don't drive a lot, need a lower monthly payment, or want to drive the most recent high-end vehicles, a lease may be better suited to your needs. Likewise, purchasing a vehicle is more likely to fit your situation if you prefer to have an asset in hand, want to add customizations, or need to drive unlimited miles. Consider your situation before deciding whether to lease or buy your next car.

When you're ready to get into a new set of wheels, stop by to see the team at Koons Clarksville Chevrolet Buick GMC. Our financial experts can help determine whether leasing or purchasing a vehicle is best for you. Find us at 12421 Auto Drive in Clarksville, Maryland. You can also complete our secure online form or call us at 866-478-0605 to get started today.



Buying your next vehicle                                                 Leasing your next vehicle

WHO OWNS IT
Whether you pay for the car with cash, or finance it and make monthly payments, either way it's yours. Of course, if you're financing it, you'll have to meet the obligations the lender requires, like a certain down payment amount and timely monthly payments. If you don't, they have the right to repossess it.

UP-FRONT COSTS
If you're financing it, the bank will probably request a down payment. You can also trade-in another vehicle and use any equity towards your down payment. The amount of the down payment is usually based on the lender's requirements and your credit score.

FUTURE VALUE
Your vehicle will be worth whatever you can sell it for in the future and that depends on how well you maintain it. (Be smart and protect your investment with regular scheduled maintenance by a factory-authorized facility!)

END OF PAYMENTS

Once you've paid off what you owe on your contract, that's it. Your vehicle is 100% yours. The lending institution will send you a Lien Release as proof that the vehicle is completely paid off and all yours.








WHO OWNS IT
You do not own the car when you lease. You're paying for the use of the vehicle, but the finance institution that you leased it through actually owns it. This is usually why you pay less per month in a lease than if you were to buy the car.

UP-FRONT COSTS
Leases often do not require any type of a down payment. All you usually have to pay is the first month's payment, a security deposit, the acquisition fee and other fees and taxes. But, as with a purchase, if you want to lower your monthly payments you can always pay more upfront.

FUTURE VALUE
In most leases you don't end up owning it so you don't end up selling it. That's the financial institution's job. Although you may have mileage limits and wear and tear guidelines that, if you exceed them, could cost you extra money when you turn your vehicle back in.

END OF PAYMENTS
Most people return the vehicle at the end of the lease term. But some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork and we'll make sure you have your lease set up the way you want it.

BEST CARS TO LEASE

The best cars to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less. Review the lease ratings to see which cars retain their value.