Should I Lease or Buy my Vehicle?
If you have in mind negotiating a new vehicle, "zero kilometers", it is essential that you evaluate the differences between leasing and buying. Let's see.
- The down payment and monthly payments are usually less than the purchase option because only the amount of depreciation that the vehicle will suffer while you drive it is used as the basis of calculation.
- The lease contract generally lasts three years, which allows the user to change cars as often and benefit from the latest available technologies.
- The lease includes an option to purchase the vehicle for the stipulated residual value.
- Contracts usually include a guarantee.bumper-to-bumper” which covers all types of repairs.
- At the end of the contract, the user gives the vehicle to the dealer and does not have to worry about finding a buyer.
- The interest derived from a loan to lease the vehicle is deductible as an expense against the IRS.
- The number of miles traveled is limited to a range of 9,000-15,000 miles per year.
- The cost of the insurance is usually higher than what is charged in case of acquisition.
- After the term of the contract, the user does not have any accumulated equity value left.
- The vehicle must be delivered to the dealer in its original condition with normal wear and tear related to use.
- Structural or mechanical modifications to the vehicle are not permitted.
- Usually only users with a good credit rating can access, that is, above 670 points on the FICO scale.
- If the contract expires and you decide to do business with a competing dealer, you will be assessed a $350 “disposal fee” as a penalty for your inconsistency.
- You enjoy the full right of ownership after the cancellation of the last installment.
- There is no limitation on the number of miles the owner can use.
- The owner has the right to the use and abuse of the unit.
- There are no limitations to the physical and mechanical modifications of the vehicle.
- Insurance rates may be slightly lower.
- The owner enjoys the equity value accumulated in the vehicle.
- The amount of the credit is determined by subtracting the initial payment from the total value of the vehicle, so the monthly payments are usually higher than in the leasing option.
- The Initial Fee is generally higher than that of the lease option.
- The longer the term, the higher interest is charged to the monthly installments.
- After a while the technology becomes obsolete in relation to the innovations.
- The value of the vehicle fluctuates according to
- with the Market, unlike the lease in which it is stipulated in the contract.
- The interest derived from a loan to buy the vehicle is not deductible as an expense against the IRS.
If you decide to buy a vehicle, it is likely that you meet the following conditions:
- Use the vehicle above 12.000 miles per year.
- He is not worried about being out of style.
- He is not interested in technological advances.
- It has the resources to pay an initial fee and monthly payments higher than those of the “lease”.
- You prefer to pay for eventual repairs once the vehicle is paid for.
- You like to enjoy unlimited use and even abuse of your vehicle.
If, on the other hand, you want to have a new car every three years, enjoy the latest advances in technology, pay an affordable monthly fee and not pay for repairs, your solution is to lease.
Finally, I recommend that you negotiate with a firmness that is directly proportional to your credit rating and that takes into consideration the inventory of vehicles that the dealer has to place. The seller will always have the latitude to "talk to the manager" to provide you with better conditions...