Auto Leasing vs. Buying | Auto Lease Differences
Auto Lease vs. PurchaseYou've decided you want a new car. Should you obtain a loan, lease or pay cash? There are pros and cons for all three. Make an informed choice about what's best for you. Paying Cash
Only about 10% of all automobile purchases are cash transactions. If you pay the full value of the car with cash up front, it's all yours. However, you also don't have that money available for other uses…investing, emergencies, etc…. Initial Costs
Leasing almost always has one very powerful advantage over a loan: lower initial cash outlay. With leasing, there is normally little initial cash required. Generally, the better your credit rating, the less cash required at the start of your lease. Occasionally, you will be asked to provide a refundable security deposit (the first and perhaps the last monthly payment) and/or a down payment (or capitalized cost reduction). As with most lease terms, these can be structured to meet your needs. However in most instances, PROLEASE requires no down payment. Continuing Costs
Whether you buy or lease, there are continuing costs. Your monthly payment will be the biggest portion. However, there are also taxes, insurance, repairs, maintenance and operating costs. Equity & Ownership
A lease does not build equity or ownership in the vehicle. When you finance your car with a loan, you gradually build equity as you pay it off. However, compare the amount of money spent to acquire the title to the value of the car after making all of the loan payments. In most cases, it will be worth much less than the amount spent to obtain it. And while it is an asset, it is a continually depreciating one, which loses more and more value each day. Taxes & Insurance
Tax and insurance obligations vary by state. In most states, you must pay the entire sales tax up front when purchasing a car. With leasing, you can generally amortize (or spread out) the sales and rental/use taxes over the term of the lease.
Leased vehicles require higher insurance coverage, both collision and comprehensive. Leasing may also require a lower deductible on your policy. Monthly Payments
Leases are structured to keep the payments lower than loan payments. Therefore, you can generally add more options or upgrade to a more expensive model than you could afford with a conventional loan. Other Differences
Consider how often you want to drive a new car. Leases can have shorter terms than loans. So, you can drive a new car every 2 or 3 years and still have a reasonable payment.
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