Which is better for me? Leasing or Financing?
Maybe you’ve already found the model, the year, the color, and have done your research on all the vehicle has to offer. Or, you find something you hadn’t even thought of that fits your needs even better! Now that you are ready for a new car, there are a few more options to consider.
When choosing your vehicle, there are two primary ways to “pay” for it: Financing and Leasing, or Loan vs. Lease. Which option you take is determined by your needs and the availability of the vehicle in that make and model.
Here are 5 questions to ask yourself to help determine which plan is the best option for you and your family:
- What is your monthly budget? Lease payments and financing payments depend on a multitude of variables, such as, but not limited to: your credit score, the amount of your down payment, financing or lease rates, which fluctuate like all interest rates, and the length of the contract. For new Toyotas, on average, you can lease a new vehicle for a lower monthly payment than if you finance the vehicle. This is because a lease isn’t paying off the entire purchase price of the car, but paying to lease the car for the agreed upon amount of months and miles. The reason why Toyotas lease so well is because they hold their value better than almost any other brand. The blue is significantly higher at the end o the lease (typically 36 months) than almost every other make. So the amount you pay to lease the vehicle is less. When you make payments on a financed or purchased car, however, you build equity in your own vehicle over time. When financing a new Toyota, you are more likely to owe less than your car’s value after making payments for a short amount. For instance, if you owe $15,000 and the vehicle is worth $18,000, you have $3000 in equity. So if you want to trade it in, you can use that $3,000 equity as a down payment on your next vehicle and reduce the amount of your next loan, lowering your monthly payment. You can also find out the trade-in value of your current vehicle here with this tool.
- How many miles do you expect to be driving? When you lease a vehicle, you will need to consider how much you drive, and calculate your annual mileage. Then, you can set the terms for your lease that work best for your lifestyle. One of the variables that affects your monthly payment is the number of miles you will drive over the length of the contract. If you plan to put fewer miles on your new vehicle, your monthly payment will be lower than if you were to put more miles on the vehicle. If you don’t drive very much and you’d like to take advantage of the lowest monthly payment possible, leasing may be a great option. However, if you drive quite a bit, financing the vehicle may be a good option for you. We can show you all the options and you can decide what works best for your lifestyle and needs! You can also use our express store tool and see how your monthly payment would change based on your options.
- How long do you need the vehicle? If you like to keep cars for long periods of time, or if you like the flexibility to sell, trade-in, and purchase another vehicle whenever you wish, then financing might be a great option for you. If it appeals to you to decide exactly how long you want to drive a vehicle, then leasing might be the best fit. Some vehicle owners like to have the flexibility to trade it in their vehicles whenever they want, so they prefer to finance. Some just like to lease a new car every two or three years. We have some customers who finance and still buy a new car every year. We have some customers who do a 12-month lease every year. Some business owners lease vehicles because of tax reasons. Most of these decisions come down to just your own preferences.
- Do you want to OWN the vehicle? This may seem like a silly question, but some people really want to own their vehicles, and they don’t like to lease vehicles for that reason. Of course, if you lease a vehicle, fall in love with it and want to keep it, you can purchase it after the lease is up! But if having equity in a vehicle and keeping it for a while is appealing, then the financing route might be a great way to go.
- What are your plans after your vehicle is paid off, or your lease ends? Most of us may not know exactly, but if you were planning on creating equity by financing and making payments for a certain amount of time, and using that equity to reduce the loan on your next vehicle, then you know which route to take. If that’s not important, and you want to drive a new vehicle every two or three years, and you want to give it back at the end of the lease and get another brand new car, then leasing is a great option. Plus, you can purchase protection plans either way, and have zero maintenance costs for the duration of the contract.
These are a few things to consider, but we would love to answer any questions you may have when it comes to financing or leasing a vehicle here at Berge’s Riverview Toyota. Don’t hesitate to contact us today!