You’re in the market for a new car and trying to decide whether to lease or buy, but unsure which will better fit your needs. Leasing and buying have advantages and disadvantages, so it depends on what’s most important to you. To make an educated choice that you’ll be happy with, Panama City Toyota is here to help.
Leasing A Car
Image via Flickr under CC BY 2.0 by automobileitalia
When it comes down to it, leasing is like an extended rental of a car. This type of auto financing allows you to rent a car from a dealership for a fixed length of time, with limited mileage included. You’ll make monthly payments for the duration of your lease. At the end of your lease period, you’ll return your vehicle to the dealership. You won’t own your vehicle unless you buy out your lease if you decide to keep your vehicle. However, that choice is only available if you’ve chosen to include that option in your lease.
To lease a car, you’ll need a good credit score. The typical Experian score needed to lease a vehicle averages 733. On the other hand, Fico scores that average 670 or above are considered good. It’s important to remember that although you don’t own your vehicle, your lease payment will be tracked and be part of your ongoing credit score. Late payments and the uneven history of payments will lower your credit score. Most leases require a down payment, the amount of which will vary according to your existing credit score.
The Pros and Cons of Leasing a Car
An advantage to leasing a car is you’ll be getting a new vehicle each time you lease. Your monthly payments are also lower than the fees associated with payments for financing a car through a traditional loan. The dealership covers your maintenance costs, and they’re responsible for repairs. Moreover, if you need a fancy car, perhaps for your work image, leasing can provide you with a more expensive car than you could otherwise afford.
Another plus to leasing a car is that you won’t have to have as large of a down payment as is usually required when purchasing a vehicle. Another pro is you get to drive a brand new car every few years. Also, if you like the notion of not having to pay for the upkeep of a vehicle as it gets older, there’s something nice about being able to drive a car in its prime before it shows significant signs of wear and tear, or starts being prone to needing repairs.
The cons are that you won’t own your car, you have limited miles, and you’ll be charged if you go over the mileage limit. You’re paying for a car that’ll never be an asset. There are also fees associated with the early termination of your lease agreement. For example, if you decide you don’t like your vehicle or find it doesn’t suit your needs anymore, you will end up paying additional fees to get out of your lease prematurely. The dealership also has costs they’ll charge you, even if you make it to the end of your lease period.
Buying A Car
When you buy a car, you own it permanently, or for as long as it lasts, or until you decide to trade it in to a dealership or sell it privately to an individual. You can either buy a car with all cash or take out a loan to finance the vehicle, which most people usually do. Even with a loan, most car dealerships require a down payment. The lower your credit score, the higher your down payment amount will usually be.
Buying a Car With Cash vs. Financing a Car With a Loan
Unless you have a substantial amount of cash on hand, you’ll need a car loan. You can find applications for loans online. Ideally, you want to get a preapproved loan. It factors your budget and gives you an interest rate to compare to the dealer’s financing rate. You may also find that the dealer can offer you the lowest annual percentage rate. At the same time, you’ll want to check your bank or credit union’s webpage or prominent lenders, including Nationwide or Capital One. Your research should give you a good idea of which lender offers the best financing for your needs.
You’ll need to gather documentation to apply for a car loan. Compile your salary and employer information and the balances of any debt you may hold. Make sure that you’ll be ready within about two weeks after seeking loan pre-approval to go car shopping. This strategy is designed to reduce the number of hard inquiries to your credit. Hard inquiries negatively affect your credit score, and therefore should be kept to a minimum. On the other hand, you get to circumvent all those steps if you pay with cash, and you’ll own your car outright from the start, so it’s also instant equity.
Pros and Cons of Car Ownership
One of the pros of owning your car is building equity and working toward full ownership. At the end of your loan period, you fully own an asset. Your vehicle will also have a trade-in value when it’s time to buy another car. In addition, you won’t have a limit on how many miles you can drive. On the other hand, some of the cons of owning a vehicle are that you’re solely responsible for your car’s maintenance, your monthly payment on your loan is higher than the monthly lease cost, and your vehicle depreciates in value as time goes on.
The End of the Road: Making your Choice
If you keep these differences in mind, you should determine whether leasing or buying a car is more suitable for your purposes. Panama City Toyota can also be a good resource for explaining what deals we currently offer. Our knowledgeable team would be happy to assist you in comparing leasing vs. buying on any of our available vehicles. Contact us today to set up an appointment or just drop in and we’ll show you around. We work hard to make sure you get your dream car with the lease or ownership you desire.
