Leasing is attractive for drivers who want lower monthly costs and to drive the latest technology and safety features. It can also help you get into a luxury vehicle that would otherwise be out of your price range.
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Costs
Buying a vehicle typically involves higher upfront costs and monthly loan payments than leasing. However, it offers the potential for significant long-term savings. Car buyers can take advantage of tax deductions and build vehicle equity.
The cost of purchasing a vehicle prepared by the professionals at Turner Chevy can also be reduced by paying cash. However, this is only a practical option for some shoppers. Many dealers make money on car financing and are less likely to negotiate with buyers who pay in full.
Leasing is an attractive option for those who want lower up-front costs, shorter-term commitments, and a chance to experience new car technology every few years. However, leasing can become expensive if you are not careful. There are fees associated with exceeding the mileage allowance, modifying the vehicle, and returning it at the end of your lease.
Taxes
Although a purchase generally involves paying more taxes than a lease, the amount that can be deducted on your tax return (if you itemize) outweighs that extra cost. Leasing can also be a good choice if you drive a car for business purposes and have enough mileage to qualify for an income tax deduction of its total cost of operation.
The dealer will roll sales tax into your monthly payments in most states, so you’ll pay less upfront. However, at the end of the lease, you’ll have to pay a portion of the remaining sales tax on the vehicle’s residual value. Check your lease contract to find out how the residual value is determined and calculated. It’s typically stated at the beginning of the agreement so you can figure out the amount of sales tax you’ll have to pay at the end of the lease.
Down Payment
In some cases, leasing can be cheaper month-to-month than buying a vehicle, particularly when getting into a higher-priced model with the latest active safety features. But at the end of the lease term, the car will need to be returned, and there could be extra charges if it’s driven over what’s considered normal wear and tear.
Alternatively, you’ll have to make higher monthly payments with an auto loan, but once the vehicle is paid off, it’s yours. You can also resell or trade the car when ready for something different.
The best way to save for a down payment on a new vehicle is the tried-and-true method of cutting back on unnecessary expenses. Reduce your spending on food, movies, and vacations to build a savings fund for your next car purchase.
Maintenance
Many drivers lease a car because it can reduce their monthly payments or allow them to drive a more luxurious option. However, many of these same drivers choose to buy their leased vehicles when the lease ends. However, determining whether this is a wise decision depends on several factors, including your current car market and priorities.
Most leases have a specific mileage limit that must be met yearly, or you may face additional fees. Buying may be the better choice if you drive a lot of miles. Additionally, many people like to customize their vehicles, which can be a challenge with a lease since any modifications could impact the value at trade-in or sale time and could even void your warranty.
Be sure to compare the total out-of-pocket costs associated with leasing and financing. It will give you a clearer picture of which option is suitable. Remember that manufacturer incentives and resale value should factor into your decision-making process.
