SHOPSMART AUTOS – CUSTOMER INFORMATION – JANUARY 7, 2021
LEASING A VEHICLE (PT.2)Why Is Car Leasing Cheaper Than Buying?
On a monthly basis, leasing a car is usually less expensive than buying. Because you’re just paying for the vehicle’s depreciation while you have the car, your monthly payments are typically lower than they would be if you purchase a vehicle. Let’s look at an example using a 2019 Honda CR-V to illustrate. For simplicity, we’ll say that you negotiated a $30,000 price for the purchase or lease, and you’re going to make a $3,000 down payment with either transaction. If you get financing for five years with a 5 percent interest rate on a loan from a bank, credit union, or other financial institution, the monthly payment is $510 for the purchase of the Honda. You can use our car loan calculator to figure this out. Let’s say you choose to lease instead. For this example, we’ll assume that your CR-V will be valued at $17,000 after three years and you’re getting an interest rate (called the “money factor” in leasing) that’s equivalent to 5 percent. The difference between the negotiated price and the residual value is $13,000. You’ll pay $3,000 up front, and the remainder of $10,000 will get split up into equal monthly payments. Generally, your first month’s payment is included in the amount you pay up front, so the remaining $10,000 gets divided over 35 equal monthly payments. Your lease payments will be about $308 per month, plus some fees. For this example, your monthly payments when you lease will be about $200 per month less than when you buy. Of course, there’s a catch. When you finance a car, you don’t have to make any payments once the car is paid off and you can potentially get a significant amount of money back when you sell the car. When you lease, on the other hand, you have to return your vehicle at the end of the contract and likely won’t get any money back. If you want a vehicle to drive, you’ll either have to take out a new lease, with new monthly payments, or purchase the car and have loan payments. In the long run, car leasing is usually more expensive than buying – and you’ll always have a car payment. For more information about the differences between car leasing and taking out a loan to buy a new car, read our article on leasing versus buying. Make it a champion day!
Tags: 2019 Subaru Forester Touring, 2020 BMW iX3, 2020 Chevrolet Suburban, 2020 dodge charger, 2020 EQC, 2020 Ford Super Duty, 2020 Honda Pilot, 2020 Kia Optima, 2020 Mercedes Benz, 2020 Nissan Versa, 2020 Subaru WRX STI, Audi SUV, BMW, Brandon K. Hardison, Chevrolet Car, Chevrolet Sonic, Dodge charger, electric vehicles, honda, Honda Pilot, Hyundai SUV, Mercedes Benz, Nissan Rogue, SUV, upcoming car, Volkswagen, Volkswagen Tiguan SEL Premium R-Line, Volvo Car
Trackback from your site.
