New Car: Rent vs. Lease

[megumic]

So it seems we''re in a pickle. Our only car has crapped out again and will cost upwards of $1500 to fix, which is not worth it. We''re contemplating how to proceed. Our initial thought is a certified pre-owned car with some sort of warranty for a period. Our second thought is to lease. Leasing has only come into play to help conserve cash in our pocket now(i.e. no down payment on buying a car, albeit a small one to lease). But at heart we''re buyers, not leasers.

Anyway, would love to hear both sides of the coin from others who have gone through the buy/lease process. Neither FI or I have gotten new cars on our own (well, "new" for us - neither of us have ever had a new new car), so we need all of the advice and knowledge we can get! Thanks!

 

[radiantquest]

I am also a buyer, but I think you should first see how much they would give you for your current car. It may be just enough to offset the downpayment on a car to buy. If not, then I think it is fine to lease in your situation. You lease it for a term and then you can always buy it out at the end of the lease period. People do that all the time. DO NOT RENT. That is just wasting money.

 

[Shoopy]

I have never gone through the leasing process but just wanted to chime in that a new car does not have to = down payment. I have never given a down payment for a vehicle. It''s all about knowing how much you can afford per month and getting a car within that amount.

I also wanted to pass along some tools from bankrate.com. I think bankrate is a really good resource when doing research on just about any financial decision.

GL!

Bankrate Auto Calculators

 

[Hudson_Hawk]

Ditto fiery, I''ve never had to put a down payment down on a new car (or a new used car for that matter). Sure it would be a good thing, but it''s not necessary. I also don''t think certified pre-owned cars are a good value. There are great used cars out there that are CPO so don''t limit yourself. See Zoe''s recent thread about extended warranties for a good overview of the pros and cons of buying an extended warranty with your car. Personally I factor the cost of one into the cost of buying a used car-CPO cars have this included usually, but sometimes it''s just the balance of the warranty the car originally came with.

I would not lease just for practical reasons. I have to drive 30 miles each way to work so that pushes the limit of the annual mileage budget they give you. Also, unless you have STELLAR credit most leases require a down payment.

 

[Callisto]

Idk when the deal ends but Toyota currently has 60 months of no interest payments which is pretty much unheard of. I know there''s the current issues but I do still think that Toyotas are good cars.

I wouldn''t lease a car, from what I know about it, it''s not really an effective financial solution. My parents leased one once and said they would never do it again. We only buy cars now.

 

[RaiKai]

I got my first NEW car last year. I went many years without owning one at all (lived downtown, so not much point), to a couple real beaters, to my new car.

I financed it. Leasing would allow slightly lower monthly payments (or a more upgraded car at the same monthly payment price) but then at the end of the lease term to buy it out at the end of the period would end up being more costly than just financing it from the start when I did the calculations. And the difference in payments was not that significant. Leasing make sense to me if it is a work car (i.e. your work is paying for it - my mother gets her company cars through leasing, buys them out at the end and then gets a new leased car....but she does not have to pay for it!) but for personal use...to me it made more sense to just finance it. Leasing also makes sense if you like to switch your cars up often or do not want to deal with selling your own car at the end, and such. Also, make sure the mileage limits will work for you. I tend to run less miles on my car than the average, but the mileage limits are often a concern if you are leasing. I personally don''t see much benefit in leasing but I do know there are people who prefer it.


I did not have to put money down (though I did have a couple incentives that I used to put down on it) and was able to pick a term that worked for me and monthly payments that worked for me. The thing to be careful of is that many salespersons will have you focus on the "monthly payment" instead of the overall price and up-sell you. Such as "oh, it is only $50 more a month to get the ground effects" - well, $50 extra a month over a 5-year financing period....is another $3,000 and they don''t put the interest in when they tell you that. STICK to what you are willing to pay per month.

In regards to certified pre-owned vehicles...sometimes it is a good value. You just need to check with the dealership. When my DH traded in one of his still-new cars a handful of years ago he got a used 4Runner from the dealership along with a full-term new warranty (not just the balance of the old one). He has not had to get too much warranty work on it as it was definitely in good shape, but there certainly have been times he has needed it and the warranty has been worth it and definitely saved significant money. And despite Toyota''s issues, he has always had wonderful, wonderful service from them. I do see a benefit in going CPO for that reason. So, check what the warranty deal is.

 

[delayedreaction]

I wouldn''t lease a car unless it was a "fun" 2nd (or 3rd) car like a convertible or a sports coupe/grand tourer where the best part of the experience is really the first few years.

 

[geckodani]

We lease. Cars depreciate in value the minute you drive them off the lot, and I enjoy getting a new car every few years. Also, if something goes wrong with the car, for the most part it''s covered.

 

[lilyfoot]

I''ve never leased a car, only bought. I bought a new car last August. I just checked the KBB value, and private party/suggested retail value''s are more than what I paid. Trade-in value is about 1k less than what I paid. And that''s with no down-payment at all, and a very affordable monthly payment.

If you are able to get a screaming deal on buying a car, it''s not always so dramatic of a depriciation in value.

Also, new cars (usually) come with at least a 36 month/36,000 mile vehicle coverage and 5-year/60,000 mile powertrain warranties. Nissan has extended the powertrain warranty for my car to 10-years/120,000 miles.

 

[HVVS]

Well, if you don't put down a sizable down payment or have a good trade as down payment, you'll have to make some whopping big payments in order to stay ahead of the depreciation. It's never a good idea to owe more than the vehicle is worth, unless you have some money-making investments elsewhere to offset it. Why is this a problem? If the car is totaled, and you owe more than it's worth at that point, insurance pays what it's worth and you still owe the difference, on a dead vehicle that you no longer own. So now you have to pay that back, and also replace the vehicle. Same applies if it turns out to be a lemon and the manufacturer buys it back: You get the market value of it after the manufacturer has stalled around as long as possible, and let it depreciate even more.

Remember, a new vehicle can lose 50% of its value within 2 years. That's why I think the returns from 2 year leases are the sweet spot of vehicle purchases. They will have balance of factory warranty, they will be eligible for manufacturer's extended warranty, or can have the original owner's ext warranty transferred to you for the extra fee (last time I looked). Plus, they have possibly depreciated to half of the original sticker and you get an almost-new vehicle while the original lease owner has assumed all of that depreciation for you.

There used to be gap insurance, to cover being "upside down" (owing more than it's worth.) You might look for that if you are going to be upside down from the day you drive off the lot. New vehicles drop in value the split second they are purchased. I don't know if gap insurance still exists. I've been buying my vehicles outright since 2001.

 

[RaiKai]

Date: 4/13/2010 10:57:49 AM
Author: lilyfoot
I've never leased a car, only bought. I bought a new car last August. I just checked the KBB value, and private party/suggested retail value's are more than what I paid. Trade-in value is about 1k less than what I paid. And that's with no down-payment at all, and a very affordable monthly payment.


If you are able to get a screaming deal on buying a car, it's not always so dramatic of a depriciation in value.


Also, new cars (usually) come with at least a 36 month/36,000 mile vehicle coverage and 5-year/60,000 mile powertrain warranties. Nissan has extended the powertrain warranty for my car to 10-years/120,000 miles.

Yes, always makes sense to check the warranty. You can often get an extended one too. I also have a 3 and 5 year warranty (I think different mileage than yours though). I have a Mazda. For someone who battled with repeated problems with used cars for about 3-4 years, this is great peace of mind

Also I have free road side service for 3 years, and free LIFETIME tire replacement and fills (nitrogen tires) and so on. My financing term is five years, so the warranty lasts almost through it.

Oh, and I did get up-selled a bit into their theft protection program which was pretty minimal cost on the total price because it was already built into my car (I bought it off the lot). If my car is stolen and unrecovered or recovered but damaged to a write off - Mazda will give me something like $5,000 extra cash, no questions asked. Of course, I have private insurance to cover off damage or loss, but they give that extra $5,000 on top of that to make up for any differences and hassle and on my insurance I have full replacement value currently (costs a bit more but worth it for me).

At the end of the term, I can sell it. My family has owned at this point 3 or 4 Mazda cars and generally had always sold them quickly and for still quite a bit (usually for around 60% of their original cost after 5 years and average to above-average mileage). This is my first Mazda, so we will see when time comes. If I can recover even 50% of what I paid for it after 5 years of driving it, I will be very very happy with that!

Also important to note....some cars depreciate FAR faster than others. Nissan's for example generally are good for not depreciating much. My MIL totaled her car a couple years ago when she hit a moose...the insurance company gave her thousands more than she expected it to have still been valued for! Something like 85% of the value of a 2-year old car. She bought another Nissan (due to the value...and that she survived hitting a moose in one!). Other cars don't fare so well...I once saw something about how one of the Kia's (maybe the Sorrento?) depreciated something like $7,000 within the first year. My Mazda has a depreciation of like $1,500 or something in the first year. That is a huge difference! Over five years mine depreciates only about $8,000 or so.

There are a few car depreciation calculators and stats on the web.

This is a handy "costs of ownership" guide for different makes and models. You can find the costs of ownership including financing, insurance, and depreciation. It is interesting, as a CHEAPER car can cost a LOT more over five years due to higher depreciation, etc. As it indicates, some cars also hold value far, far better than others. So, it is not true that all cars depreciate 50% after two years.

Costs of Ownership

 

[Hudson_Hawk]

Date: 4/13/2010 10:59:28 AM
Author: HVVS
Well, if you don''t put down a sizable down payment or have a good trade as down payment, you''ll have to make some whopping big payments in order to stay ahead of the depreciation. It''s never a good idea to owe more than the vehicle is worth, unless you have some money-making investments elsewhere to offset it. Why is this a problem? If the car is totaled, and you owe more than it''s worth at that point, insurance pays what it''s worth and you still owe the difference, on a dead vehicle that you no longer own. So now you have to pay that back, and also replace the vehicle. Same applies if it turns out to be a lemon and the manufacturer buys it back: You get the market value of it after the manufacturer has stalled around as long as possible, and let it depreciate even more.


Remember, a new vehicle can lose 50% of its value within 2 years. That''s why I think the returns from 2 year leases are the sweet spot of vehicle purchases. They will have balance of factory warranty, they will be eligible for manufacturer''s extended warranty, or can have the original owner''s ext warranty transferred to you for the extra fee (last time I looked). Plus, they have possibly depreciated to half of the original sticker and you get an almost-new vehicle while the original lease owner has assumed all of that depreciation for you.


There used to be gap insurance, to cover being ''upside down'' (owing more than it''s worth.) You might look for that if you are going to be upside down from the day you drive off the lot. New vehicles drop in value the split second they are purchased. I don''t know if gap insurance still exists. I''ve been buying my vehicles outright since 2001.

Actually there still is gap insurance. Some people don''t have the luxury of buying cars outright or pay enough up front to stay ahead of depreciation.

 

[MichelleCarmen]

Hi,
I did a pre-owned with a warranty. The car was around 6 months old when I purchased it, and then it blew out a head gasket when I was driving down the road and the whole engine seized up. That was fun! lol Anyway, I called and the warranty covered rebuilding the engine and all worked out fine. In an ideal world, I would buy with a car with another warranty.

In my life, I''ve owned four cars and paid cash for the first (but that doesn''t count b/c it was a VW bug and wasn''t very much money - lol not a "real" car), and then put down payments on the other three. If you can get one of those 0% rates for a certain number of months, then I could see that as a reason to put less (or none) down. Unfortunely, I never qualified for one of those deals, so I put money down and purchased vehicles that could be paid off early.

Just to add; really try and get one with an extended warranty if possible.

I don''t know anything about leasing. Some deals seem tempting. . .

 

[MichelleCarmen]

Date: 4/13/2010 11:38:42 AM
Author: Hudson_Hawk


Actually there still is gap insurance. Some people don''t have the luxury of buying cars outright or pay enough up front to stay ahead of depreciation.

Yeah, that''s a reason to try and buy a less expensive car. My husband and I considered buying a fancier car and later were SO glad we decided to keep my Subaru instead. It''s 9 years old now, but paid off and no hassle. When we buy again, we''ll have a chance to save up first and will always go with a car that''s a few years old. For some people cars are huge deals. . .for me, I''m happy with a car that''s $20K or under. I think fancier cars are a waste of $.

 

[Hudson_Hawk]

Date: 4/13/2010 11:44:53 AM
Author: MC

Date: 4/13/2010 11:38:42 AM

Author: Hudson_Hawk



Actually there still is gap insurance. Some people don't have the luxury of buying cars outright or pay enough up front to stay ahead of depreciation.

Yeah, that's a reason to try and buy a less expensive car. My husband and I considered buying a fancier car and later were SO glad we decided to keep my Subaru instead. It's 9 years old now, but paid off and no hassle. When we buy again, we'll have a chance to save up first and will always go with a car that's a few years old. For some people cars are huge deals. . .for me, I'm happy with a car that's $20K or under. I think fancier cars are a waste of $.

Of course that's a reason to buy a less expensive car, but again, some people don't have the money to pay cash and have to finance. The way I personally like to get ahead of depreciation is to buy used or buy a new car when major incentives are being offered. Don't say that people who don't have a bulk sum of cash to lay out on a car up front are unwise or somehow not deserving of owning a car. Different people have different situations that require different approaches.

EAT: MC, the part in bold is not directed at you, it's directed at the previous posters who were pretty judgmental in my opinion.

 

[MichelleCarmen]

Date: 4/13/2010 11:48:19 AM
Author: Hudson_Hawk

Date: 4/13/2010 11:44:53 AM
Author: MC

Date: 4/13/2010 11:38:42 AM

Author: Hudson_Hawk



Actually there still is gap insurance. Some people don''t have the luxury of buying cars outright or pay enough up front to stay ahead of depreciation.

Yeah, that''s a reason to try and buy a less expensive car. My husband and I considered buying a fancier car and later were SO glad we decided to keep my Subaru instead. It''s 9 years old now, but paid off and no hassle. When we buy again, we''ll have a chance to save up first and will always go with a car that''s a few years old. For some people cars are huge deals. . .for me, I''m happy with a car that''s $20K or under. I think fancier cars are a waste of $.

Of course that''s a reason to buy a less expensive car, but again, some people don''t have the money to pay cash and have to finance. The way I personally like to get ahead of depreciation is to buy used or buy a new car when major incentives are being offered. Don''t say that people who don''t have a bulk sum of cash to lay out on a car up front are unwise or somehow not deserving of owning a car. Different people have different situations that require different approaches.

EAT: MC, the part in bold is not directed at you, it''s directed at the previous posters who were pretty judgmental in my opinion.

HH - I do agree with everything you said. What''s being left out of this conversation is how much we all consider an appropriate down payment to be. Even if it''s just $500 or $1,000 on a $10K car, that''s a start in getting that loan paid down. If everyone could put something down, it''d be great, but if not, as long as the payments can be made, then really it''s nobody''s business what a person does. Also, going to the bank every month or other and paying a bit down on principal can make a huge difference - a way for those who cannot pay up front but can chip away at their loan here or there to even things out.

 

[Dancing Fire]

rule #1...never lease a car.

buy what you can afford.

 

[Dancing Fire]

Date: 4/13/2010 9:32:57 AM
Author: radiantquest
I am also a buyer, but I think you should first see how much they would give you for your current car. It may be just enough to offset the downpayment on a car to buy. If not, then I think it is fine to lease in your situation. You lease it for a term and then you can always buy it out at the end of the lease period. People do that all the time. DO NOT RENT. That is just wasting money.

IMO...leasing is no different from renting.

 

[movie zombie]

i''m with Dancing Fire 1000000%.

$1500 to fix a car and keep it running for several years is a drop in the bucket compared to what one loses buying a new car and/or leasing.

mz

 

[Tacori E-ring]

Never lease.

 

[that_someone_special]

I must be weird because I''ve never known anyone that DIDN''T put a down payment down on a car... every bit helps!!

Also, I''ve never leased but I''ve always seen things like "$2500 due at signing"- which is like a down payment.

Personally, I don''t think it''s a smart idea to lease a car. You can only put so many miles on the car within your lease, and if you go over- you pay PER MILE! Yikes!! Not to mention, when you turn the car in, you got nothing out of the deal. No re-sell value, no down payment back....

If I were to ever lease a car, it would be with the intention of buying it at the end of the lease. But then, why wouldn''t you/ I just buy it from the beginning?

I''m really tired so I hope that made sense. I strongly recommend just buying a car and making payments.

 

[Mara]

we're on our 2nd leased car. we thought about buying this time around but a lease is just so much easier IMO.

for us it's not about what is the better value necessarily, just what is easier.

our first lease was 2.5 years and we just handed the car back at the end. we paid nothing extra. we put down $2k at the beginning of the 2 years. my payment was about $300 less a month than my friend who bought basically the same car. i remember thinking i would never want to pay $300 more a month to own that car at the end of the 2.5 years.

oh and we drove the car wherever and whenever we wanted, even taking multiple road trips per year, and at the end we were still like 5k miles under our cap. but then again i don't have a long commute to work, it's about 10 miles each way. if i did commute like 50 miles each way or something then i don't think a lease would make sense from a miles persp.

we get the package that covers pretty much most of what you'd need to pay for at the end of the leasing period, and most leases come with scheduled services for free as long as you have it. so basically i just take the car in and have it serviced, don't have to worry about anything ourselves ever. it's what we prefer. we only have one car payment, so it's not about cost, just whatever is easier. and the payments can be significantly less per month but it depends on the car.

funny we used to be 'buyers' and i could see if you want to keep a car after 3 or 5 or 7 years. our last car we knew we would only keep it a few years, it was a fun car. we had to get rid of it to get a family car, but we got a compact family car. in 3 years we might need a bigger car, so again we prob wouldn't want to keep our new car in 3 years anyway.

in cases i can see the merits of renting vs buying... the housing market is supporting this right now as well. it just depends on what your priorities are and what you see as your plan in or 2 or 3 years.

oh also re: certified pre-owned, this might make sense for some of the manuf's that have strong support and service contracts around this. aka BMW...our friends just bought a CPO and they loved it. they got a crazy good deal on it, a lot of the manuf's are giving huge markdowns from sticker (they negotiated $3k more off of a $25k sticker price on a 3 year old SUV) and also you can get extended service contracts. i would not get a CPO that didn't either come with a few years on warranty left OR an extended service contract, because otherwise you could be shelling out a lot in maintenance in a few years. but again, this only makes sense if you plan to keep the car a few years down the road.

 

[kenny]

When the lease is up you give back the car.

All that money, and nothing to show for it.

I think of leases as for people who have decided that they want to enjoy (or be seen in) a car they can't afford to buy.

I do not share that value, but if you do so be it, that is your right and you don't have to explain to anyone.

 

[geckodani]

Date: 4/13/2010 1:18:39 PM
Author: kenny
When the lease is up you give back the car.

All that money, and nothing to show for it.

I think of leases as for people who must be seen in a car they can''t afford to buy.

I do not share that value, but if you do so be it.

Um. I lease a Focus, LOL. DH has a Mazda 3.

Could we buy them? Sure. Do I get great lease deals through Ford since my dad was an employee? Yup.

As Mara said, it is just easier for us to lease, basic maintenance is covered, and I get a new car every 2-3 years. *shrug*

 

[Mara]

oh and IMO the lease must mean you can''t afford to buy thing is old-school mentality...kind of like buying vs renting to our parents and tossing money away.

when we were getting our latest car, the salesguy was telling us how many people have been coming in to get the Audi A8 (that really expensive coupe). he said that people who CAN afford cars like that don''t even bother buying it because they don''t care about the money. they just want to ''rent'' it for a while and then give it back when they are bored. the payments on this thing were $4k a month. that is a house mortgage!!! he was saying..these are people who make something like $5million a year. they obviously CAN afford the car but don''t care about owning it.

a diff perspective.

 

[kenny]

As I said, so be it. *shrug*

People vary.
Each can have strong opinions.

I'd guess if you bought every 3 years and paid for your own maintenance you'd come out ahead since you sell the car when you are done with it instead of give it back.

But to each his/her own.

 

[that_someone_special]

Date: 4/13/2010 1:23:24 PM
Author: geckodani

Date: 4/13/2010 1:18:39 PM

Author: kenny

When the lease is up you give back the car.

All that money, and nothing to show for it.

I think of leases as for people who must be seen in a car they can''t afford to buy.


I do not share that value, but if you do so be it.

Um. I lease a Focus, LOL. DH has a Mazda 3.


Could we buy them? Sure. Do I get great lease deals through Ford since my dad was an employee? Yup.


As Mara said, it is just easier for us to lease, basic maintenance is covered, and I get a new car every 2-3 years. *shrug*

To me, I guess I don''t really understand this. If you made payments on the car for 3 or 4 years, the maintenance is still covered, but at the end, you own the car... and can sell it back in for money. With a lease, you are going through the motions of owning a car without getting anything in the end...?

 

[Shoopy]

Date: 4/13/2010 1:09:45 PM
Author: swedish bean
I must be weird because I''ve never known anyone that DIDN''T put a down payment down on a car... every bit helps!!

Also, I''ve never leased but I''ve always seen things like ''$2500 due at signing''- which is like a down payment.

No not weird

I don''t ever put a down payment because I go for what I can afford. When I finished my Masters and had just started working, I worked out my 5 year financial plan, came up with an amount that I thought would be comfortable enough for me to afford per month (given my previous salary...I''m making $30k more now but didn''t put that into the equation at the time), and found a car that fit within that budget. Turns out it was a new corolla (well used but it only had 200 miles

) and that was a-ok with me.

Had I used the money in my savings for a down payment, I could have went for a Camry or perhaps even a Lexus but that money that was in my savings I also used for other things like furnishing our new place (and leaving behind my college wardrobe of sweat pants and t-shirts).

Plus, down payments are like traps at the dealership. They start off with "how much can you afford each month" followed by "how much are you willing to put down" and then point you in the direction of a shiny, brand new car that is way over what you can afford each month but with the down payment it gets you to that affordable monthly payment. If you have that information ahead of time, you can say show me a car in this range, fall in love with one of those shiny, brand new car and then use the down payment as a way to lower what you could already afford (or save it). KWIM?

But I''m someone that doesn''t pay much attention to cars. I drive them until they die (my chevy literally died on me and had to be towed away) and I don''t care much for features. I bought my corolla in 2007. Before then I was driving my chevy and listening to TAPES! LOL Yes, in 2006 I was jamming to tapes

. Now I have a CD player which was and still is very exciting lol

 

[NewEnglandLady]

For background, I wouldn''t lease, nor would I take out a loan for a car. I''ve always paid cash for cars (my first was $300). That being said, I would pay the $1,500 to have your current car fixed, then keep saving money until you find a used car in the budget.

How many miles are on your current car? How long do you think the repairs would last? 18 months? 2 years?

Our sedan is in the shop right now--it has 190K miles on it. We paid about $6,500 eight years ago and have put ~$2,500 of work into it, which averages less than $100/month to date. I''m happy to put another $1K into our clunker if it will last another year. Practically speaking, your car would have to be in the shop CONSTANTLY in order to for it to cost more than a monthly loan or lease.

 

[geckodani]

Date: 4/13/2010 1:33:04 PM
Author: swedish bean

Date: 4/13/2010 1:23:24 PM
Author: geckodani

Um. I lease a Focus, LOL. DH has a Mazda 3.


Could we buy them? Sure. Do I get great lease deals through Ford since my dad was an employee? Yup.


As Mara said, it is just easier for us to lease, basic maintenance is covered, and I get a new car every 2-3 years. *shrug*

To me, I guess I don''t really understand this. If you made payments on the car for 3 or 4 years, the maintenance is still covered, but at the end, you own the car... and can sell it back in for money. With a lease, you are going through the motions of owning a car without getting anything in the end...?

Because it still ends up being cheaper for us, and we get new vehicles every few years, which is important to me (safety upgrades, plus, new cars are fun).

Take my car for instance. I have a 36 month lease on a 2009 Ford Focus. To purchase my car would have cost approximately $17,000. Over 36 months that equals out to $472 a month.

My monthly payments are less than half of that. For what it would have cost per month to purchase my car, my husband and I both lease and drive new cars.

http://www.leaseguide.com/lease03.htm Interesting article there. The salient part for me is:

"Buying and leasing are different

When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it. You typically make a down payment, pay sales taxes in cash or roll them into your loan, and pay an interest rate determined by your loan company, based on your credit history. You make your first payment a month after you sign your contract. Later, you may decide to sell or trade the vehicle for its depreciated resale value.

When you lease, you pay only a portion of a vehicle''s cost, which is the part that you "use up" during the time you''re driving it. Leasing is not the same as renting. You have the option of not making a down payment, you pay sales tax only on your monthly payments (in most states), and you pay a financial rate, called money factor, that is similar to the interest on a loan. You may also be required to pay fees and possibly a security deposit that you don''t pay when you buy. You make your first payment at the time you sign your contract — for the month ahead. At lease-end, you may either return the vehicle, or purchase it for its depreciated resale value.

Buy vs lease example

As an example, if you lease a $20,000 car that will have, say, an estimated resale value of $13,000 after 24 months, you only pay for the $7000 difference (this is called depreciation), plus finance charges, plus possible fees.

When you buy, you pay the entire $20,000, plus finance charges, plus possible fees.

This is fundamentally why leasing offers significantly lower monthly payments than buying."