There are definite pros and cons to both leasing a car and buying a car. Now that you know you are in the market for a Nissan from Elevated Nissan let our sales staff and finance team help you decide which option is right for you and your budget. With much of the workforce working remotely (primarily from home), there is much less commuting from Kansas City to Overland Park than ever. So, the downsides of leasing, including wear and tear penalties and mileage restriction charges, are less concerning for many; these circumstances make leasing an option for many more drivers.
On the other hand, the year 2020 has caused many people to crave stability, and owning your car offers stability because of the extended warranty period and guarantee of ownership. Still, car dealership’s inventory is low, which makes leasing easier and will encourage dealers to offer excellent leasing deals. Please read ahead to understand further the pros and cons of leasing or financing your vehicle.
Leasing vs. Buying: Outlining What Leasing Means
An essential aspect of exploring both options is understanding what leasing options exist and what they mean thoroughly. In essence, when you lease a car, you are basically “renting” a new car from a dealership for a certain amount of time and a certain number of miles for a set monthly payment.
In addition, some leasing options allow you to return the car at the end of the lease or repurchase it from the dealership. It is important to know upfront that you generally are required to have “good” credit (a FICO credit score of 670 or higher) to qualify for a lease, and your monthly payments will show up on your credit history.
Leasing Terms Defined:
- You can lease a used car, but it makes sense to consider financing a Certified Pre-Owned (CPO) vehicle instead.
- Open-End vs. Closed-End Leases: An open-end lease is a lease agreement that provides an extra payment when the lease expires to adjust for any change in the property’s value. A closed-end lease is a vehicle rental agreement that puts zero obligation on the lessee (the party responsible for periodic lease payments) to purchase the leased asset at the end of the contract.
- Capitalized Cost (Cap Cost): It’s the negotiated selling price of the car plus any additional fees you might want to include in the monthly lease payment (such as the acquisition fee).
- Capitalized Cost Reduction: A capitalized cost reduction is an upfront payment that reduces the cost of financing. You might pay less with the value of a trade-in vehicle or through rebates.
- Residual Value: A car’s residual value is the vehicle’s value at the end of the lease term.
- Depreciation: It is the value reduction of the vehicle during the lease period. The depreciation cost is what makes up the most significant part of the lease’s monthly payment amount.
- Rent Charge: A “rent charge” or a “Lease Charge” is the sum of all monthly finance fees over your lease’s entire term.
- Use Tax: A lease doesn’t incur sales tax on the end cost of the vehicle. Instead, only lease payments are subject to that tax.
- Guaranteed Auto Protection (GAP) Coverage: Gap coverage is an agreement by the lender or a third party to cover the gap if your vehicle is stolen or totaled.
- Early-Termination Charges: An early termination charge is generally the difference between the amount credited for the vehicle and the remaining balance on the lease. This calculation is a part of the lease.
- What happens at the end of my lease: You buy the car or settle the amount and walk away.
Three solid reasons to lease:
- You want to drive new cars.
- You do not want to own a car.
- You only need a car for a short time.
Leasing vs. Buying: Pros vs. Cons of Each Financing Method
The Pros of Leasing:
- You can drive an excellent car for less money.
- You have a little (or no) down payment at signing.
- You have warranty coverage, so lower-cost repairs and maintenance.
- You owe a lesser amount of sales tax.
- The transition to a new car is significantly easier every two to three years.
- There are no trade-in hassles at the end of the leasing period.
The Cons of Leasing:
- Your mileage is restricted – generally, no more than 12,000 miles are allowed per year unless you purchase extra.
- You don’t automatically own your vehicle when the leasing period ends.
- You pay more over time and don’t own the car.
- Leasing contracts are often confusing and full of unfamiliar terms.
- You may unexpectedly face costly wear and tear charges at the end of the lease.
- If you find you need to terminate your lease unexpectedly, it can be costly.
The Pros of Buying:
- You save money in the long-term by buying.
- You are free to modify your car as you see fit.
- There are no excess mileage penalties.
- You can sell the car any time you want or need to.
- You can use the car as a trade-in if you decide you want to buy another car.
The Cons of Buying:
- You have to make an initial higher down payment to avoid owing more than what the car is worth.
- Monthly car payments are generally higher than monthly lease payments.
- You are responsible for repairs and maintenance after the car warranty expires.
- The car depreciates because of the amount of cash you have tied up in the payments.
- When you decide to buy a new car, you may have to hassle with negotiating a trade-in with your old car.
Explore Leasing and Financing Options at Elevated Nissan
Now that you know the ins and outs of leasing start exploring our current leasing and financing specials or simply apply for financing online. You can also shop in your pj’s from home for your new car! We’re here for you by chat, by phone, or by email, and you’re welcome to make an in-person appointment, too. Contact us to start the process of having a new car to drive!
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