Should You Lease or Buy a New Vehicle?
The choice of whether to buy or lease a new vehicle is one of the biggest financial decisions we can make. If you’re thinking about getting behind the wheel of a new Dodge Charger, Challenger, Durango, or RAM 1500 truck, take a minute to familiarize yourself with the pros and cons of each approach.
There are few cookie-cutter answers for whether buying or leasing is a better choice, but certain individual preferences may suggest one approach over the other. For example, if you love working on your car in Bakersfield, especially concerning installing after-market parts and making modifications to your drivetrain, then you’re a likely candidate for buying a vehicle, as you can’t make significant modifications to leased vehicles.
The simple answer for Bakersfield, CA drivers is money. Generally speaking, monthly payments on a lease tend to be markedly less than monthly payments for a purchase. Furthermore, a car, truck, or SUV in a lease from our Haddad Dodge Ram dealership is almost always covered under the manufacturer’s warranty, which means that mechanical failures won’t cost you anything, with a low likelihood of needing to replace tires, brakes, or exhaust components.
Another reason: the latest safety and connectivity technology. When you drive a leased vehicle in the Kern County area, you are by definition driving a car, truck, or SUV that is fewer than four years old. If you’re driving a vehicle that is getting along in years, you don’t have access to the latest safest technologies like collision alerts or blind-spot monitoring. Being in a lease also means Bakersfield drivers get the latest infotainment tech at your disposal, including voice control and smartphone integration that allow you to access your technology without looking at your phone. We have fantastic Dodge and Ram lease deals at our dealership near Taft and Delano, CA. Browse our online inventory and visit us to test drive a new vehicle today.
Still Unsure? Contact Us with Questions
If you still haven’t made up your mind, speak with a member of our finance center to discuss your individual situation, and explore your options.
Why don’t even more people lease?
The biggest objection most folks have to lease is that they don’t understand it. People tend to fear and avoid things they don’t understand, especially when they are in an uncomfortable environment (such as a typical showroom). Here’s a quick contrast example between financing and leasing a $20,000 vehicle for a 60-month loan and a 36-month lease:
When you get a $20,000 loan, the bank pays us $20,000 for your car and keeps your title until you pay off the entire $20,000, plus interest.
When you lease, the bank also pays us $20,000 and keeps the title. What’s the difference? With a loan, the bank wants back 100% of the $20,000, plus interest. With a lease, the bank only wants you to pay $8000 plus interest (the difference between $20,000 and the residual of $12,000. The “residual” is the pre-determined value of the leased vehicle after 36 months).
Common Misconceptions about Leasing
- With a lease, I don’t own anything.
- When you take out a loan, do you get the title? Not until you pay off the whole amount. So you don’t really “own” it till it’s paid off. A lease is the same way. The bank retains the title and if you want to own the car you just pay off the lease.
- With a loan, I own the car at the end.
- True. But not much of a car…a five-year-old car with higher miles. If the lease saves you $120 a month for the term of a 60-month loan, that’s $7,200 that you have in your pocket instead of your car. (And that’s assuming you didn’t make some additional interest on it by investing it or putting it in the bank.)
- It’s better to own than rent.
- The reason you should buy a house instead of rent is that the house usually appreciates (or at least they did before the financial crisis). But cars depreciate. And they have significant costs. Most people who lease never pay for brakes or tires, for example, because they don’t keep the car long enough to wear them out. If you finance your car for five years, you’ll almost certainly need tires and brakes at least once, plus other repairs.
- The dealer makes more money when I lease.
- This is true, but not in the way that you would think. Whether you buy or lease at Haddad, you pay the same price for the car. However, we do sell more cars overall because research shows that lease customers are more likely to become customers for life (and why wouldn’t they? They’re always driving a newer, safer, more reliable car for a smaller payment!)
- I can’t trade the car in before lease-end.
- Actually, you can. After driving your car for 30 months, don’t you think it’s less expensive to get out of a 36-month lease that’s almost up rather than a 60-month loan that’s only half paid? Approximately 40% of people owe more on their loans than their cars are worth-not only do they not have equity, they are actually “upside down.”
- I don’t want a new car every few years. I like to buy new, pay the car off, and then have the car without a payment.
- While you may not have a payment in those out years, there are still costs. You’ll be spending more on repairs to keep an older car on the road, older cars use more gas and pollute the environment more, have fewer safety features than modern cars, and are more likely to break down and leave you in a dangerous situation.
- I drive too many miles.
- Cars depreciate about 25 cents per mile. Yet with a lease, you can buy additional miles upfront for only 20 cents. In the end, if you go over, they’re only 30 cents. People who put a lot of miles on financed cars usually end up owing more than they are worth-not only do you not own your car, it owns you!
- I had a bad experience with a lease because I drove over the miles and I had to write a big check at the end.
- If you had financed the car instead, don’t you think that piling on extra miles would have substantially reduced the value of the car at trade-in time? Cars depreciate about 25 cents per mile but they only cost 30 cents on a lease if you go over. If you buy them upfront, they’re only 20 cents! So if you’re concerned about driving a lot of miles, we’ll build them into the lease for you. Either way, you’re better off putting too many miles on somebody else’s car!
- I had a bad experience with a lease because I had to pay for damage at the end.
- People who trade in financed cars with damage have to pay too-because they get less at trade-in time. You don’t get a bill in the mail for it, but you still pay it. Furthermore, our experience with lease returns is that the inspectors are pretty lenient about minor damage because they want you to get another lease.