Leasing vs. Buying a New Chevrolet at ALM Chevrolet South

How Car Leasing Works

Since you’re probably familiar with the basics of the buying process, let’s start by explaining how car leasing works. Just like when you finance a car purchase, you’ll have a monthly lease payment. You’ll sign a contract to lease just like signing loan paperwork. You may provide a down payment the same as if you were buying the vehicle.

The big difference between leasing and buying a vehicle is in the terms. Most car loans are set for four to five years while leases are usually limited to two or three years. At the end of the term, you own the vehicle when you’re purchasing it. At the end of the lease term, you must either return it or purchase it minus the amount you paid on the lease.

The Advantages of Leasing

One of the big advantages of leasing a vehicle is lower payments. When you buy a car, the loan includes the total price of the vehicle and interest. When you lease a vehicle, the lease includes the price minus the value of the vehicle after depreciation during the lease period. For instance, a $30,000 car may be worth $20,000 at the end of a three-year lease term. Your lease payments will be calculated on the difference between these two amounts, or $10,000, which is the amount of depreciation for the vehicle. Other fees are included in this oversimplified explanation of lease payments, but you have an idea of why lease payments are often lower than financing payments.

Another advantage is that you don’t have to sell the vehicle at the end of the lease. You can return it and lease another new vehicle, continually owning a model that is under warranty and has no need for repairs. You may also be able to afford a more expensive model because the payments are lower. You continue to get the latest technology and features with new models.

The Advantages of Buying

When you buy a vehicle, it’s yours. Once the loan is paid, you own the vehicle with no more payments until you’re ready to replace it. If you like to keep your vehicles for many years, this benefit could be worth the added cost of financing one. You can also modify the vehicle anyway you want, which isn’t allowed with a leased vehicle.

You won’t pay for excess wear and tear, like you would with a leased vehicle. If you have kids or pets, it could be challenging to keep everything clean and looking like new. You can drive a vehicle that you’re purchasing as much as you want. Leased vehicles often have mileage restrictions, and you’ll pay extra if you go over.