What is best for you, buying your new
Nissan or leasing it? A lease might seem confusing and complicated but they may be
easier than you think. Before eliminating leasing as a financing option, you
should have a solid understanding of the different purchasing
When you purchase a vehicle:
The benefit of buying is that you'll own the vehicle one day,
you will actually be free of car payments. The car is yours to sell whenever,
and you are not locked into a firm contract of how long you will own the
vehicle. Also, when you purchase a vehicle, the requirements may very well be
lower for insurance coverage, than if you lease, saving money on your premium.
In addition, when buying a car, you determine the miles you want to put on,
without suffering penalties.
The thing about owning versus leasing is the
payment you will make every month, which is usually higher when buying.
Additionally, there is the out-of-pocket down payment, so the initial cost is
higher when buying a car.
Presumably, as the years pass and you make your
payments, you have the ability to build equity in the vehicle. However, this is
not always the case. When you buy a car, your monthly payment reflects the
entire cost of the car, amortized over the length of the contract. But
depreciation can take a toll on the value of your car, especially in the first
few years. As a result, buyers who put a low or no down payment can end up
financing most or all of the vehicle and possibly find themselves in a negative
equity situation, in which the vehicle becomes worth less than what they still
owe on it.
Monthly vehicle payments are divided between paying principal
and interest. The amounts dedicated to each vary from payment to payment. In the
early years of paying back your car loan, the lion's share of each payment goes
toward interest, not the principal. But in that same time, most new vehicles
depreciate 20 to 40%. The loss in equity is considerable: your vehicle
depreciates quickly, and because the payments you've made have mostly gone
towards the interest, not the principal, you are left with very little equity in
When you lease a vehicle:
Perhaps the greatest
benefit of leasing is the lower up-front costs when getting and maintaining the
vehicle. Leases require little or no down payment. Additionally, monthly
payments are usually lower and you get the advantage of a new truck, car or SUV
every few years.
With a lease, you are basically renting the car for a
fixed number of months. Therefore, you pay only for the use of the vehicle while
you are using it, and you are not forced to absorb the full depreciation cost of
the vehicle. Leasing a car will never put you in a negative equity situation.
Leasing also provides the benefit of driving more vehicle than you might
be comfortable paying for, monthly payment-wise, when purchasing. Andfor
business owners, leasing a car may offer tax advantages if the vehicle is used
for business purposes. Talk with your accountant to make sure before just
A downside of leasing is that you always have a payment,
and if you don't care for that, then leasing may not be right for you. With a
lease, you never really own your vehicle. That said, depending on your type of
lease, when your lease is up you either return the vehicle, or finance the
remaining value of the vehicle and go from making lease payments to loan
payments. Many people use a lease to afford more luxury than they might
otherwise be able to afford, on a monthly basis, by first leasing, then buying
The mileage restrictions might be another drawback. If you
drive many miles in a year, instead the purchase. Leases usually restrict you to
10,000, 12,000 or 15,000 miles per year. If you go over the agreed amount of
miles, you pay extra: between 15¢ and 25¢ a mile. That can lead to a major
expense at the end of the lease, unless you choose to purchase the vehicle at
Finally, insurance companies tend to charge higher premiums
for leased vehicles, due to the higher coverage they require. Though, an adult
that has a good driving record shouldn't be affected to the point of making a
lease a fiscally poor decision.
Words of Caution for Leasing a Car
downside to leasing is that you essentially pay for the most expensive years of
a vehicle's life instead of the dealer. The amount for which you lease is the
difference between the purchase price and the salvage, or residual value, which
is the predetermined value of the car at the end of the lease period. The amount
of the salvage value that the dealer includes in your contract, directly impacts
your monthly payment.
The choice between leasing and buying will always
depend on your personal desires, needs and abilities. If your plan is own the
vehicle, and thus be rid of the monthly payment associated with financing of any
kind, buying a car may be best for you. If, desire or need is to drive a new
vehicle every two to four years and keep your payments as low as you can,
leasing a car may be a good alternative.
We at CARR Nissan hope that this
information helps you in whatever decision you make, regarding your new Nissan,
or great used car, truck or SUV. Regardless of how you choose to finance, we can
help get you the right term for you. Just give us a call at (888) 689-8815, or
stop in and ask for one of our knowledgeable finance managers.