Leasing vs Financing

Usually, after you select a vehicle brand, model, color, options etc, you are faced with another tough decision. Should I finance my vehicle or lease my vehicle? Unfortunately, we cannot make that decision for you, but we can help you choose the option that makes the most sense for you!

Lease vs Financing

Let's take a look at leasing.

For those looking for lower monthly payments and having a new vehicle that (normally) is covered under warranty for the term of the lease, leasing might be the way to go. Lease terms can be for any number of months depending on the lease programs available, but three year leases are most common. Leasing a vehicle for three years pretty much ensures that your vehicle will be covered by your manufacturer warranty from the start to the end of your lease term. This could help you avoid costly repairs if they are covered by the warranty.

Leasing is limited to a number of miles per year. While leases are most commonly structured in 10,000 mile, 12,000 mile and 15,000 mile increments, virtually any number of miles can be configured into your deal. If you drive more than the allotted number of miles per year, you could pay mileage penalty based on the number of miles you are over on your contract.

With leasing, you never actually "own" the vehicle. When your lease term date comes around, you have the option of purchasing the vehicle for a pre-determined buy-out price or you can turn in your vehicle. If you are looking to get into a new vehicle, you can negotiate any positive equity you have in the vehicle into your next deal, or roll any negative equity into your next deal as well.

Since you do not own the vehicle, adding after-market customizations such as remote starters, sunroofs, etc, could void your lease agreement. However, continuously leasing ensures you get into a new vehicle every few years with the newest technology and capabilities available.

Let's take a look at financing.

For those looking to own a vehicle for more than a few years and make the vehicle "their own," financing might be the way to go. Owning a car allows unlimited driving. You do not have the mile restrictions or penalties that you have with leases. In addition to the mileage, excess wear and tear is not a concern for the vehicle owner. While you obviously want your car to be in pristine condition all the time, wear and tear can become a costly factor when turning in your leased vehicle. Wear and tear on an owned vehicle might not matter as much when trading in the vehicle or selling privately.

Along with the pride of owning a vehicle, you can modify your new car however you like without the concern of voiding the lease agreement. Want to add a sunroof? No problem. The only approval you need is your own (but be careful, getting the work completed by a non-brand automotive shop could void your warranty).

Frequently, car owners will have some established equity in their purchased vehicles when looking to trade-in or sell their vehicle privately. Though cars depreciate the day they leave the showroom, most vehicles maintain their value very well. Having this equity can help when looking to get a new vehicle several years down the road (pun intended).

If you're looking to purchase an extended warranty or don't mind doing your own car repairs, you might not necessarily care about the original warranty expiring while you're driving the vehicle.

It's time to ask yourself some questions.

We've compiled a list of "yes" or "no" questions that could potentially help you decide whether you fit the category of a person who is more likely to lease or finance. This is not an exact science, but we certainly hope it helps!

  1. I always drive over 15,000 miles a year
    Yes: If you drive more than 15,000 miles a year, you are more likely to finance a vehicle. While lease agreements can be structured to have additional miles figured int, if you go over the amount agreed upon, you could face some expensive penalties later.
    No: If you drive less than 15,000 miles a year, you might be a good candidate for leasing. Most leasing agreements are structured between 10,000 and 15,000 miles. If you expect to drive in that range or less, you do not have to worry about mileage fees adding up.
  2. I like to customize my car by tinting windows, adding a new sound system or sunroof, etc
     If you like to customize your car beyond its original condition or specifications, you might be a candidate for financing. With financing, you own the vehicle and are free to add whatever you want within the agreement of the warranty (and of course the law). With leasing, you are confined by the agreements of the lease agreement to return the vehicle in the same condition that you picked it up in.
    No: If making any major customizations to your vehicle is not something you expect to do, then you might be a candidate for leasing. You will not have to worry about voiding the terms of your lease agreement since you will be returning your vehicle in the same condition as you picked it up in.
  3. I usually get emotionally attached to my car
     If you're the type that gives your car a name and hates when anyone eats, touches or even looks at the wrong way, you might be a candidate for financing. The emotional attachment to your vehicle makes it difficult to give up at the end of a lease agreement. Having ownership from the beginning might make more sense for you.
    No: If you see a car as being just a car and have no or little emotional attachment to it, you might be a candidate for leasing. This lack of attachment will make it easy when you return your leased vehicle in 2-4 years and get into a new car!
  4. I like the security of driving a car under warranty
     If you like knowing you're covered under warranty every time you start your car, you might be a candidate for leasing. Lease terms normally expire before the warranty, ensuring that you are covered while driving that vehicle without having to purchase an extended warranty.
    No: If you plan on purchasing an extended warranty, or don't necessarily care that the warranty expires while you are driving the vehicle, you might be a candidate for financing. You run the risk of putting more money into your car for repairs that would normally be covered under a warranty, but depending on your perception, that risk might be worth the benefits of ownership!
  5. I usually choose a car that I can't afford
    Yes: Most of us are guilty of this. And hey, it's okay! We all like living above our means a little bit and splurging on certain things, especially cars. Leasing allows you to do that. There is a large difference in monthly payments between a financed vehicle and a leased vehicle. Take, for example, a $40,000 car. Let's say you can lease this car for 36 months and the payments would be $329/month, which might be realistic for you. If you tried to finance that same car for 36 months, the payments would be close to or over $1,000/month, which is not very realistic for most people.
    No: If you choose a car that fits closely within your budget, you might be a candidate for financing. You know what you can afford per month and might value ownership. Maybe you don't have every package that comes in your car, or the car doesn't park itself, but sometimes all that matters is it's comfortable to ride in and comfortable for your wallet too.

To take the full test and find out whether you might be a better candidate for leasing or financing, visit our Hyundai website here!

Still not sure what to do? Give our customer service representatives a call at 732-557-7886 and they will be more than happy to walk you through all of your options!


Categories: Tips & Knowledge