Let’s take a quick look at the similarities and differences between taking on a loan versus a lease. You’ll notice that they are more similar than different:
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Similarities
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Differences
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Monthly Payments
Vehicle Return
Future Value
Upfront Costs
Total Costs
Frequency Changing Vehicles
Gap Coverage
Warranty Expiration
Ownership
Mileage
Rate Disclosure
End of term
Excess Wear
|
On-going costs
Early Termination
Options at Early Termination
Vehicle Maintenance and Wear
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What you need to consider in making your choice is the longevity of the commitment and the likelihood that you are going to have a need for this particular vehicle at the end of the lease. A lot can change in 3-5 years, so you need to make sure you are comfortable with this type of decision.
There are a number of benefits to leasing as well as taking on a loan. Below is a simple view of the similarities, differences, and points that are surprisingly the same.
| Lease Benefits |
Loan Benefits |
Lower Monthly Payments
Want a new car every 3-5 years
Want warranty coverage during full term of contract
More cash retained during contract
|
Drive over 10-15,000 miles per year
Need flexibility to sell within 3 years
Do NOT want car payment after 5 years
No additional charge for wear and tear at end of lease
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These Qualities are the SAME for both a Loan and Lease
- Will depreciate (lose value) at the same rate
- Interest rate will be approximately the same
- The selling price of the car is the same
- Warranty will expire at the same time
- Insurance is required for both
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