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Differences between
Buying and Leasing
You'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, Interstate Auto Leasing 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.
Taxes
Tax 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.
Lower Monthly Payments
Means More Car
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 luxury car every 2 or 3 years and still have a reasonable
payment.
Next: > Advantages &
Disadvantages
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