Finance Options

 



It's a common dilemma: to lease a car or buy a car- which is better? Everyone who has ever considered leasing has had this question cross their mind. After all, our parents and grandparents have always financed or paid cash for a car: isn't that what we are supposed to do as well? The truth is- it depends on you and what you want.

The truth is it is not as simple as saying,"Buying is always better than Leasing" or vise-versa, because the right answer is different for every person. It depends on your personal preferences, needs and what you want out of your car owning experience. Simply put, leases and purchases loans are two different methods of automobile financing. 

On this page, you will learn the differences between a lease and a purchase. We will draw on information found on various automobile websites to give you a wide range of information, questions to ask yourself and the benefits and cons to both traditional finance and leasing options. Please feel free to always pick up the phone and call us at  (530) 345-9444 to talk to one of our knowledgeable Subaru Leasing Consultants.  

Questions to Ask Yourself: 
  • Is having a new vehicle every three or four years with no major risks more important then long-term costs?
  • Are long term cost savings more important than lower monthly payments?
  • Is having some ownership in your vehicle more important than low up front costs and no to little down payment?
  • Is it important that you pay off your vehicle and be debt-free for a while, even if it means  higher monthly payments for the first few years and higher maintenance cost in the car's older years?

Buy vs lease example:
As an example, if you lease a $25,000 car with a residual value of 50% or $12,500 after 36 months, you only pay for the $12,500 difference (this is called depreciation), plus finance charges, plus possible fees. For those customers that live here in California you only pay taxes based on the part you use (typically added to each month's car payment), not the entire amount of the vehicle. 

When you buy, you pay the entire $25,000, plus finance charges, plus Government fees, plus the entire sales tax amount up front. In California you would be looking at around $2,500 in addition to the car. 

To summarize, leasing typically does not build ownership equity, while buying does. The reason that a buyer has equity at the end of his loan is that he purchases that equity by making higher monthly payments. Part of each payment funds the equity. Leasing = lower payments, little to no equity.
Buying = higher payments, partial (and declining) equity.

Mileage matters

Subaru leases are typically 10,000, 12,000, or 15,000 miles per year but can be customized up to 30,000 miles to meet your particular needs. If you have a lifestyle and driving habits where you can "guesstimate" that your annual mileage will fall within these parameters, then leasing is a viable option. However, if you exceed the allowed miles at the end of a lease, expect to pay .15 per mile overage fee. This is why it is important to know how many miles you expect to drive a year. 


Early Termination
If you want an early termination of your purchased vehicle, you would have to either sell it privately or trade it in. This often results in negative equity (owing more than the true value of the car).  With leasing you are only responsible for the balance of the payments owed.

GAP coverage
Subaru leases have automatic built-in GAP coverage. Car purchase loans almost always do not. Gap coverage, or gap insurance, pays the difference between what you owe on your loan or lease, and what your vehicle is actually worth if your vehicle is stolen or destroyed in an accident.

Why is gap insurance important? 

  • Because it's very common, in these days of long-term loans to be "upside down" and owe more on your loan or lease than your car is actually worth. This can mean you'll still owe hundreds or thousands of dollars to the finance company even after your insurance has paid for your car that has been totaled or stolen. This turns out to be a huge shocking surprise for most people caught in this unfortunate situation.

So, Subaru leases have built-in gap protection, but loans do not. You're better protected with a lease, unless you purchase the gap insurance separately at extra cost for the loan. Subaru of Keene offers GAP insurance on all purchase plans. 

Comparing the Two 
So, is it better to lease, or to buy? As with any question of this type, there are always pros and cons, pluses and minuses, advantages and disadvantages.

You should LEASE if: 

  • If you enjoy driving a new car every three or four years
  • Want lower monthly payments
  • Like having a car that has the latest safety & technology features
  • Knowing your vehicle is always under warranty
  • Don't enjoy trading and selling used cars 
  • Have a stable lifestyle
  • Drive an average number of miles


You should BUY if:
  • If you don't mind higher monthly payments
  • Prefer to build up some trade-in or resale value (equity) 
  • Like the idea of having ownership of your car 
  • Prefer paying off your loan and being Debt-Free for a while
  • You don't mind paying cost of repairs after warranty has expired
  • Prefer to drive your cars for years to spread out the cost
  • Like to customize your cars beyond what the warranty allows
  • Don't like the risk of possible lease-end charge


CONCLUSION
If you are a two car family where at least one car does not exceed 15,000 miles per year, a clear option would be to lease at least one of your vehicles. Purchasing a car can be more risky than leasing. We all know how much cars depreciate. The best option is the one where you put down the least amount of money. The less out of your pocket, the less you have to lose. If you would like to see both options please ask your Chico of Subaru Client Advisor to show you BOTH lease and finance payments on any vehicle so you can make an informed decision.


SOURCES

//www.smartmoney.com/spending/autos/to-buy-or-to-lease-7868/ 
//autopedia.com/html/LeaseCompare.html 
//www.infoplease.com/ipa/A0193143.html 
//www.carbuyingtips.com/lease.htm