Leasing VS Buying a New Car
There’s a lot to take into consideration when shopping for a new car; the look, feel, safety features, entertainment, and connectivity. Chrysler, Dodge, and Jeep in particular are proud to be innovators in the industry; introducing tech that excites a lot of drivers. So, the least we can do is help ease some of your decisions by tackling your financing options.
A person’s financial goals are usually the driving force in the decision to lease or finance a car. They both offer perks, for example, leasing is known for providing lower monthly payments, however, that doesn’t necessarily make it cheaper. It’s important to understand the implications of both options, that’s why we’re comparing leasing VS buying your new car.
WHAT IS LEASING?
Think of leasing as renting a vehicle. The dealer will still be the owner of the vehicle, allowing you to drive it for a monthly fee. A lease usually expires in 2-5 years, at which point you stop making payments and return the vehicle.
WHAT IS FINANCING?
Financing is borrowing money, instead of a vehicle. Your payments aren’t collected by the dealer, rather a lending company or financier. This is because the financier purchases the vehicle for you, you simply pay them back. The financier makes money from the interest on the payments. After all the payments are made, you own your vehicle.
YOUR CREDIT MAY DECIDE FOR YOU.
Either way, having poor credit will make things more difficult, whether you’re financing or leasing. In this situation, a lease is more likely to be approved. An additional option is to get a loan from the bank. Many institutions offer a line of credit with low to moderate interest rates. More customers have success financing this way because of built-in collateral which your vehicle offers.
When it comes to buying or leasing a vehicle there are usually short-term benefits, and long-term benefits.
SHORT-TERM: When comparing the same vehicles, over the same amount of time, monthly lease payments are usually 30%-60% lower than loan payments through a financier. That means, if you plan to have your car for less than five years, leasing is often beneficial.
LONG-TERM: If you’re keeping the vehicle for several years, you’ll likely spend less money in total through financing. The monthly payments may be slightly higher, but you get to keep your car. Logically, it does make sense that the cost of buying and driving one car for ten years is more affordable than driving three or four cars over the same period.
DO INSURANCE COMPANIES HAVE A PREFERENCE?
The short answer is no. Leasing or financing doesn’t make a difference to your insurance company. However, they do care about the year, the make, model, and the vehicles’ condition. So, if you wanted to lease or finance the 2021 Jeep Gladiator today, you would pay the same in insurance either way. If you leased the Gladiator for two years though, and then in 2023 leased a new Jeep Grand Cherokee, your insurance would increase to cover the cost of it being another new vehicle. That wouldn’t be the case if you kept driving the original Gladiator. Increases like this to your insurance will happen as long as you keep driving new vehicles.
WHICH IS RIGHT FOR YOU, LEASING OR FINANCING?
It’s understandable if you’re still undecided. You might find our payment calculator helpful. We’d also like to invite you to reach out to Johnston Chrysler’s Finance Department. Speaking with a finance professional can help you see what your best option is.