Description
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Buy
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Lease
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Initial
Cost
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You
may need cash for down payment, the amount depends on your credit and any
“Special deals” offered by dealers
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Although,
lease companies claim that little or no cash will be needed, you will need
cash for “Initial Lease Costs” that may include:
-
Security Deposit
-
Lease Payment deposit in advance
-
Capitalized Cost reduction
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Operation
costs
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Excluding
payments, are usually lesser than leasing due to the lower insurance
requirements and absence of mileage driven restrictions
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Excluding
payments, are usually higher than buying due to the extra insurance
requirements and extra charges for any mileage driven over the limits
(usually 1000 mile per month)
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Interest
/ Discount rate
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Prevailing
market rates. Same as in lease
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Prevailing
market rates. Same as in Buy
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Length
of Contract
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Average
contract is 60 months, can be shorter if higher monthly payments were
acceptable
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Lease
contracts are usually 36 months.
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Contract
Liability
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Term
contract binding until fully discharged (completed). Same as Leasing
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Term
contract binding until fully discharged (completed). Same as buying
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Insurance
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Lesser
requirements than lease. No additional GAP insurance is needed
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More
expensive due to higher insurance requirements. GAP insurance is likely to
be mandatory and adds to your bill.
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Monthly
payments
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Higher
than Lease. Why? Because you are building equity and acquiring ownership
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Lower
than Buy. Why? Because do not own the asset and upon the completion of
the lease the vehicle revert-back to the dealer
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Restrictions
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No
restrictions on how many miles you drive and the type of operation. The
type, extent, and frequency of maintenance services are entirely up to
you.
No considerations are given to Miles driven and/or Excessive Wear
and Tear.
|
You
are allowed to drive limited mileage only and operate, maintain, and
service the vehicle according to pre-defined criteria. You will be charged
(up to $0.15) for each extra mile you driven, and will be assessed
“Excessive Wear and Tear” at the end of the lease.
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Sales
tax, title & License fees
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Sales
tax, license, and title fee are paid when the vehicle is purchased
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Sales
tax is added to your monthly payments (in most States). License and Title
fees are paid at inception
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Ownership,
Equity, and contribution to networth
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You
own the vehicle and will build equity and increase your networth by the
net difference between what you owe and the value of the vehicle
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You
do not own the vehicle and will never build any equity. Your networth will
decrease by the amount of the lease liability
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Tax
consideration
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Individual
taxpayers can take the higher of mileage or actual expenses. Usually,
mileage provides higher deductions for auto expenses. If actual expenses
are taken, deduction will be limited to The depreciation amount of $3,060
per year
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The
actual lease payment is deductible, unless the lease is a capital lease.
For capital leases only depreciation will be deductible.
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