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What’s better – leasing or financing?

Gary Jaffarian shares key factors to help you evaluate if leasing or financing your next vehicle is best for you.

Couple signingIt depends on your personal situation, but I am a big fan of leasing. To evaluate the best decision for you and your driving needs, let’s discuss the factors to assist you as your search for, and finance a vehicle.

1. Know your budget. First establish what you can afford. Our sales staff will ask you where you want to in terms of monthly payments. We have tools on our Jaffarian website to help you choose either to lease or finance as a way to assist you in this process.

Keep in mind factors that you may want to include in your monthly budget including extended warranties, sales tax and registration fees. Also ask your insurance agent what your monthly insurance will cost.

2. Know your credit score. A quick way to learn your score is to use a free site like CreditKarma.com, which is a secure website. To learn your credit score, you do need to give out your social security number. If you are leasing or purchasing, we will need to check your score. The score may affect your interest rate.

3. Know how many miles you drive annually. High-mileage drivers usually prefer to purchase rather than lease. If you drive 15,000 miles or less per year, then leasing may be your preferred option. Signing for vehicle

Financing or buying the vehicle:
• You pay its entire cost and loans are available on new vehicles up to 72 months and less for pre-owned vehicles.
• It does not matter how many miles you put on or how long you keep it.
• You will be required to make a down payment and/or trade in a used vehicle; and pay applicable sales tax on the entire purchase price, along with interest if you finance it.

• You only pay the part of the vehicle’s value that is used during your lease term (generally 2-3 years of depreciation).
• There is a term agreement for the number of months you lease (commonly 36 months); in addition, there is a cap on the number of miles you can put on your leased vehicle without penalty or you can pre-pay higher mileage.
• You may be required to make a down payment, although there are $0 Down Payment incentives. Volvo currently has a Sign and Drive program that presents great lease payments for qualifying customers with $0 money down.
• At the end of the you can trade it in or buy it depending on your preference.

Advantages of Leasing:
Less commitment: Most lease terms give you the option to either buy out the lease (and keep the vehicle) or return the vehicle to the dealer.
Lower monthly payments: You are essentially paying for the time you will be driving the vehicle versus paying the entire price. Leasing can offer the best of all worlds – the vehicle you want, at a monthly payment that’s typically more affordable than buying.
Good Manufacturer’s Warranty: The manufacturer’s warranty often covers the vehicle for the entirety of the lease term; this means no out-of-pocket expenses for standard maintenance or repair fees.
Low or no down payments: Down payments are often low and sometimes there is no down payment required at all on a lease so you can keep more money in your pocket.
Choose any new (or certified pre-owned) vehicle: You can experience driving new models every 2-3 years that may otherwise be out of your price range if you were buying.
First right to complete purchase at the vehicle’s residual value. This means the payment made during the lease period will be subtracted from the final price.
Trade-in value: No worries about trade-in value issues due to depreciation, economic downturns and other factors beyond your control. There are also no concerns about being impacted by the reduced value of your vehicle due to the CarFax report.

Disadvantages of Leasing:
• Leasing contracts define the number of annual miles, most often between 10,000-15,000 miles. Exceeding the miles can convert to a mile overage charge that may be as high as 25 cents per every mile over the contract amount. Keep in mind you can run the numbers and agree that with a $0 money down contract, you may be comfortable with the mileage overage fee.
• You don’t gain ownership equity over the vehicle unless you buy it out and the end of the lease period.
• Wear and tear penalty fees can be added at the end of your lease if you do not take care of the vehicle.

When you visit Jaffarian Volvo Toyota or any other dealership, I encourage you to have the finance manager run your financial scenario for both leasing and purchasing options. Check out the financing options for Toyota here. Rebates for students, veterans and other specials may only apply to purchasing. Toyota also offers a preferred option balloon finance plan, whereby you drive as an owner, but pay like you lease it. You may have the option of buying a Toyota with the convenience of lower monthly payments during the initial financing term and the plan includes a large final balloon payment. As Toyota says about their leasing programs, you can “Drive the Toyota of Your Dreams.”

Volvo has attractive offers as well, whereas if you purchase a Volvo S90, remaining lease payments will be made by Volvo. When you lease a Volvo, most models have an option for $0 cash down at signing. See the special financing programs available at the Volvo financing website.

Volvo allows you to lease a luxury vehicle you might not otherwise afford. For example, if you purchase a $37,000 vehicle, you are paying for or financing that amount plus interest, if any. If you lease the same vehicle for 36,000 miles or 36 months, you would only be financing $16,000 (based on $37,000 minus the residual value of $21,000 which you only owe if you purchase it outright.)

We are always here to assist you in helping make an informed decision as to whether leasing or financing is right for you.

Ask Gary Jaffarian




Gary Jaffarian

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