Unit F: Finance

Advantages and Disadvantages of Buying or Leasing a Vehicle

There are advantages and disadvantages of buying or leasing a car. A comparison between purchasing and leasing a car is below.

	Buying	Leasing
ownership	The buyer owns the vehicle and can keep it as long as desired.	The lessee does not own the vehicle and it must be returned at the end of the lease.
up-front costs	The costs include the cash price, delivery charge, taxes, and registration.	The costs typically include the first month's payment, a refundable security deposit, delivery charge, taxes, and registration.
monthly payments	Loan payments are higher than lease payments since the car will be paid off at the end of the loan.	Lease payments are lower than loan payments since the lessee is only paying for the interest charges and depreciation of the vehicle.
customizing	The vehicle can be modified or customized.	The lessee must return the vehicle in the same condition it was received. Any modifications must be removed before returning the car.
mileage	The buyer can drive the vehicle as much as desired.	A lease often limits the number of kilometres driven per year to 20 000. A penalty is paid if the vehicle is driven more than stated in the lease contract.
excessive wear and tear	The buyer does not need to worry about excessive wear and tear until the vehicle is sold.	Most leases hold the lessee responsible to pay extra charges for exceeding what is considered to be normal wear and tear.
early termination	The buyer can sell or trade the vehicle at any time. Any proceeds from the sale of a vehicle belong to the buyer.	If the lease ends early, the lessee is required to pay fines that may cost more than staying in the contract.
vehicle return	The buyer sells the car when it is no longer needed.	The vehicle is returned at the end of the lease.
end of term	At the end of the loan term, there are no further payments and the buyer keeps the car as an asset.	At the end of the lease, the lessee does not own the car. It can either be purchased or a new lease can be started.