Leasing vs Buying at Houston Ford

Which is better? The answer is….drumroll please….it depends! The answer depends on the specifics of each individual situation. Leasing and buying are simply two different ways of auto financing. Leasing finances the use of a vehicle, but only the portion of it you will use, and buying finances the whole thing.

Understanding Buying

When you buy, you pay for the entire cost of the vehicle, regardless of how many miles you put on. The vehicle is all yours after you have paid off your loan. How much equity you have in your vehicle when it is paid off depends on how long it took you to pay it off, how many miles you put on during that time, and current market values when it is paid off.

Understanding Leasing

When you lease, you only pay a portion of the vehicle’s cost, which is the part that you “use up” during the time you are driving it. Your lease is determined by many factors, such as how many miles per year you drive, how long you want to lease it, the residual value (the value of the vehicle at the end of the lease), and cash investment.

Pro’s of Buying

You will have the opportunity to own your vehicle. Once your loan is paid off, it is all yours. The amount of miles you drive is not a factor. If your lifestyle changes, and you cut down on the miles you drive per year, your vehicle will be worth more when it is paid off. If you start driving significantly more miles per year, you won’t be penalized for them, other than your vehicle’s value will be less when it’s paid off. You can also customize your vehicle however you want. Do you want to put some fancy rims on it? Go for it!

Con’s of Buying

Since you have to buy the whole thing, buying typically requires a longer term loan than a lease to make the payments affordable. It is no secret that vehicles depreciate. If you have a long term loan, you can run into a situation during the loan where you owe more on the vehicle than it is worth. You also will most likely be driving the vehicle for a period of time after the manufacture’s warranty has expired, which can leave you responsible for the cost of unexpected repairs.

Pro’s of Leasing

Leasing often does not require a down payment. All you usually need to pay is the first month’s payment, taxes and other fees. When your lease it done, you have three options: First, you can buy the vehicle for the residual value. Second, if the market value is higher than your residual value, you can trade it in or sell it and keep the profit. Third, if it is not worth your residual value, you can simply hand in the keys! You will never have to worry about owing more than it is worth. You will likely be driving the vehicle while it is under manufacture’s warranty the entire duration of the lease. If you love driving a newer vehicle, you can do so every couple of years, depending on how long you lease your vehicles. You will also most likely turn in your vehicle before it ever needs new brakes or tires.

Which is best for you?

All of us have different lifestyles and priorities. What is right for one person might not be right for another. The great thing about doing business at Houston Ford is that we will take the time to get to know you, assess your needs, and help you figure out what options work best for you. If you have any questions, feel free to e-mail me at natem@houstonford.com

Nate Makela

Finance Manager

Houston Ford