| Car
Leasing |
Car
Buying |
| Ownership |
| When
you lease a car, you do not own the vehicle. A leasing
company usually owns the vehicle, and lets you "rent"
it over a specified period. You get to use it but must
return it at the end of the car lease unless you choose
to buy it. |
You
own the vehicle and get to keep it at the end of the term.
|
| Up-front
Car Costs |
| Up-front
costs may include the first month's car payment, a refundable
security deposit, a capitalized cost reduction (like a
down payment), taxes, registration and fees, and other
charges. |
Up-front
costs include the cash price or a down payment, taxes,
registration and fees, and other charges. |
| Monthly
Car Payments |
| Monthly
car lease payments are usually lower than monthly car
loan payments because you are paying only for the vehicle's
depreciation during the car lease term, plus rent charges
(like interest), taxes, and fees. |
Monthly
car loan payments are usually higher than monthly car
lease payments because you are paying for the entire purchase
price of the vehicle, plus interest and other finance
charges, taxes, and fees. |
| Early
Termination |
| You
are responsible for any early termination charges if you
end the car lease early. |
You
will be subject to a buy-out charge if you end the car
loan early. |
| Vehicle
Return |
| You
may return the vehicle at lease end, pay any end-of-lease
costs, and "walk away." |
You
will have to sell or trade-in the vehicle when you decide
you want a different vehicle. |
| Future
Value |
| The
lessor has the risk of the future market value of the
vehicle. |
|
| Mileage |
| Most
car leases limit the number of miles you may drive (often
12,000-15,000 per year). You can negotiate a higher mileage
limit and pay a higher monthly payment. You will likely
have to pay charges for exceeding those limits if you
return the vehicle, usually 10 to 15 cents per mile. |
You
may drive as many miles as you want, but higher mileage
will lower the vehicle's trade-in or resale value. |
| Excess
Wear |
| Most
car leases limit wear to the vehicle during the lease
term. You will likely have to pay extra charges for exceeding
those limits if you return the vehicle. |
There
are no limits or charges for excessive wear to the vehicle,
but excessive wear will lower the vehicle's trade-in or
resale value. |
| End
of Term |
| At
the end of the car lease (typically 2-4 years), you may
have a new payment either to finance the purchase of the
existing vehicle or to lease another vehicle. |
At
the end of the car loan term (typically 4-6 years), you
have no further car loan payments. |
