Leasing vs. Financing

When You Lease Monthly Payments

Monthly lease payments are usually lower than monthly finance payments because you are paying only for the vehicle’s depreciation rather than the full purchase price during the lease term, plus rent charges (like interest). Alternatively, you can lease a more expensive vehicle for the same monthly payment as financing.

When You Lease Vehicle Return

You may return the vehicle at the lease end, pay any end-of-lease costs, and “walk away.”

When You Lease Future Value

The lessor has the risk of the future market value of the vehicle. You generally have the opportunity to gain any vehicle equity.

When You Lease Up Front Costs

Up-front costs of leasing a vehicle are usually less than up-front financing costs. They typically include the first month’s payment, a refundable security deposit, registration fees and sometimes local taxes. Up-front costs can include:

• Capitalized cost reduction
• Taxes
• Other government or lessor charges
• Optional insurance and services
• First monthly payment
• Refundable security deposit
• Prior lease balance
• Prior credit balance

When You Lease Total Costs

The total costs of leasing a vehicle for a fixed period are generally less than for financing because of lease savings on depreciation and gap coverage; less sales tax; and the time value of money benefits.

• Depreciation
• Gap coverage
• Sales/Use tax
• Time value of money

When You Finance Monthly Payments

Monthly finance payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, and taxes. For the same monthly payment as leasing, you must finance a less expensive vehicle.

When You Finance Vehicle Return

You have to sell or trade the vehicle when you decide you want a different vehicle.

When You Finance Future Value

You have the risk of the vehicle’s market value when you trade or sell it. You would also have any vehicle equity.

When You Finance Up Front Costs

Up-front costs of buying a vehicle are typically greater than up-front leasing costs. They typically include the cash price or a down payment, sales taxes on the full price of the vehicle, registration fees, and other government charges. Up-front costs can include:

• Cash price or down payment
• Sales tax
• Other taxes
• Other government or lender charges
• Optional insurance and services
• First monthly payment
• No refundable security deposit
• Prior lease balance
• Prior credit balance

When You Finance Total Costs

The total costs of financing a vehicle for a fixed period are generally more than for leasing because of higher costs of depreciation and gap liability, more sales tax, and the time value of money differences.

• Depreciation
• Gap coverage
• Sales tax
• Time value of money