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Buy vs Lease

When it comes to buying or leasing a car, the options can be confusing. To help you make an informed decision, we have provided the information below. We hope you find it informative and useful.

When you buy the new or used car, you pay for the entire cost of the vehicle. When you lease the new or used car, you pay for only a portion of the vehicle's cost, which is the part you use during the time you are driving it.

Buying

Who Owns It

Whether you pay for the car with cash, or finance it and make monthly payments, it's yours. Of course, if you're financing it, you'll have to meet the obligations the lender requires, like a certain down payment amount and timely monthly payments. If you don't, they have the right to repossess it.

Up-front Costs

If you're financing it, the bank will probably request a down payment. You can also trade-in another vehicle and use any equity towards your down payment. The amount of the down payment is usually based on the lender's requirements and your credit score.

Future Value

Your vehicle will be worth whatever you can sell it for in the future, and that depends on how well you maintain it. (Be smart and protect your investment with regular scheduled maintenance by a factory-authorized facility!)

End of Payments

Once you've paid off what you owe on your contract, that's it. Your vehicle is 100% yours. The lending institution will send you a Lien Release as proof that the vehicle is completely paid off and all yours.

Credit Worthiness

The Optimal Range for an Auto Loan Credit Score: 620-850
In many cases, to be successfully approved for an auto loan with optimal rates, a person would want their credit score to be in the 740 range. For those who do not have the luxury of having such a credit score, something in the high 600's will work, but in most cases will warrant a slightly high interest rate. FICO scores range from 300-850. An excellent credit rating is one that's 720 or higher. Those that offer auto loans will consider a rating of 620 or lower to be "subprime". Therefore, a person looking for a decent auto loan should aim to have a credit score of 620 or higher.

What Credit IsĀ 

Credit is essentially a measure of how risky it would be for a lender to give you a loan. The higher your credit score, the less risk there is involved for the lender. Credit is mainly influenced by 5 factors, the most important of which is your payment-making history. If you have consistently made payments on time, you are more likely to have a good credit score. Alternatively, missing payments or continually making late payments will have a negative effect on your credit. Another important factor is your current debt. Having a large amount of debt will lower your credit score. The three less influential factors which have bearing on your credit are the period of time over which you have been accumulating credit; when your most recent credit application was; and whether you have revolving credit (credit cards, basically) or installment credit (mortgages and car loans, usually). Installment credit is more valuable than revolving credit.


Leasing

Who Owns It

You do not own the car when you lease. You're paying for the use of the vehicle, but the finance institution that you leased it through actually owns it. This is usually why you pay less per month in a lease than if you were to buy the car.

Up-front Costs

Leases often do not require any type of a down payment. All you usually have to pay is the first month's payment, a security deposit, the acquisition fee and other fees and taxes. However, as with a purchase, if you want to lower your monthly payments, you can always pay more upfront.

Future Value

In most leases, you don't end up owning it, so you don't end up selling it. That's the financial institution's job. Although, you may have mileage limits and wear and tear guidelines that, if you exceed them, could cost you extra money when you turn your vehicle back in.

End of Payments

Most people return the vehicle at the end of the lease term, but some like to purchase it during their lease or at the end. Others like to trade it in before their lease is over. Just ask us about these different options before signing any paperwork, and we'll make sure you have your lease set up the way you want it.

Credit Worthiness

You will normally need a credit score of at least 640 to be able to lease a car, although you may be able to qualify for a lease with a score as low as 600. If your score is 700 or above. Lower scores mean you will pay a higher interest rate to offset some of the lender's risk. You may be able to get a lower rate if you are willing to put down a higher security deposit.


Best Cars, SUV and Trucks to Lease

The best to lease are those with the best book value after the term of the lease. Since they depreciate less, you pay less.


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