When we compare the two car financing methods, buying and leasing, we will see many differences between the two. The obvious difference between buying and leasing is that when you buy a car, you own it or you are paying to own it, but, when you lease a car, at the end of the lease term you have to return the car. In leasing, the basic idea is that you are paying to use the car! Following are some more differences between the two:

• In case of buying, monthly payments are applied to the actual purchase of the car. But, in leasing, monthly payments are applied to the depreciation as well as use of the car, not the actual purchase. When you are buying the car, you can do anything with it once the car is paid off and you can keep it for as long as you would like. But, at the end of a lease, you are required to return the car or buy it from the leasing company.

• Buying a car involves a down payment in the form of cash or a trade-in. But, leasing usually does not require a down payment, however, a down payment can be applied in order to lower monthly payments.
• Monthly payments in buying are higher as compared to monthly lease payments, since they are based on the total cost of the vehicle, not just its depreciation.
• In buying, a typical financing period is 48 to 72 months. After this period, you own the car with no more payments due. On the contrary, leasing typically requires the replacement of the car every two or three years. Once the lease term is over, you will need to return the car or it can also be bought!
• In buying, there are no predetermined mileage limits, but higher mileage still causes greater depreciation. But, leasing sets predetermined annual mileage limits, usually 15,000 miles per year.

This entry was posted on Friday, February 20th, 2009 at 9:26 am and is filed under Buying a Car. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.