Car Lease vs. Buy in Los Angeles
Car Lease vs. Buy in Los Angeles
Lease Payment vs. Purchase Price
Cost is one of the main differences between car lease vs. buy in Los Angeles. Leasing a car means paying for the period the car is used. When you buy a car, you pay for the entire cost of the car.
The monthly lease payments are made up of the value of the car being leased during the period of the lease. These payments are calculated by taking depreciation into account and estimating the value of the car at the end of the lease term. A sales tax may also be added to the monthly payment.
When you buy a car, you pay the entire purchase price of the car upfront or take out a loan to pay for it in installments. The monthly installments are calculated on the entire value of the car, so the loan installments would inevitably by higher than lease payments for the same car.
Loan payments for purchased cars also include depreciation charges because you are using the car. The remainder of the payment is the equity, or value of the car. You also pay a sales tax upfront when you buy a car, making it more expensive than the purchase price.
Value
One of the main disadvantages of leasing a car is that the estimated value of the car at the end of the lease term is usually less than what its market price would be. For example a car that costs $20,000 will have an estimated value of $12,750 after two years depreciation. In reality, the value of the car is usually higher after two years, say about $14,250. You will lose the remaining $1500, even if you decide to trade your car in or re-lease.
Ownership
Once a lease period is over, you can turn in the leased car and lease another car. When you buy a car, you own the car for as long as you decide to keep it. Leasing a car is good for those who like to update their cars frequently and have the latest features. When you lease a car, you do not own it; you rent it for a set period of time. A leased car is the dealer’s property, and you are paying to use it.
Maintenance
The typical 3 year lease contract means that brand new vehicles will fall within the manufacturer’s warranty for the length of the lease period. You are required to take good care of the car during the lease period. If the car maintenance is not satisfactory upon the end of the lease term, you may lose your refundable deposit. It is recommended to take out guaranteed auto insurance (GAP) during a lease. GAP insurance will protect you in case of theft or an accident during the lease period.
When you purchase a car, you are completely responsible for maintenance once the warranty period is over.
Mileage
Lease dealers will set a mileage limit on the vehicle being leased. If this limit is exceeded, you are required to pay per mile for each extra mile. This means that leasing a car may not be the ideal option for people who travel a lot.
Car lease vs. buy in Los Angeles is really a personal choice. People who want lower monthly payments and like to change their cars frequently may prefer a lease. Those who wish to own their car and do not mind paying the higher price may decide to buy a car.