734.641.8400 September 2018
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2017 PSCU
Board of Directors
Frederick W. Morgan

Jeffery King
Vice Chairperson

Dean J. Trudeau

Edward A. Carey, Jr.
Charles Lowler
 Dale Reaume
Nora Sharpley
Credit Committee
Veronica Massey
Huey Ferguson
Juanita Henry
Leasing vs. Buying
Which is right for you?

A common question is whether you should lease or buy a new car. There are pros and cons to each, but ultimately one will save you money in the long run.

Leasing allows you to drive a brand-new car for a lower monthly payment than buying a car. Lease terms are short, which means you could be driving a new vehicle every two years if you wanted. The catch is that you are not paying into eventually owing the vehicle.

When you buy a car, the monthly payments go into two categories: principle and interest. Principle pays off what you truly owe on the car and eventually allows you to outright own the vehicle. If you purchase a new vehicle and then eventually sell it, you get some money back that you have put into buying it.

With a lease you are paying to use a vehicle and getting nothing out of it except the luxury of having a new vehicle every few years. Your payments are interest and depreciation payments. You gain zero equity with a lease. Another restriction with leasing a car is the mileage limit that is put on. The average mileage is 10,000 to 15,000 miles in a year. If you go over this, you may have to pay per every mile you go over.

Here is an example: a vehicle is worth $20,000 that you could purchase with a 3.5% interest rate for 48 months or you could lease the car for 48 months for $300. If you decide to lease, after ten years leasing costs more by $12,970.07. This is taking into approximate down payments for each and depreciation of the vehicle. If you purchased the vehicle, after the ten years if you decide to sell the vehicle you could get a small chunk back. After ten years of leasing you have nothing to get back.

In the long run, leasing is more expensive, but may be the best option for some people. If you value having a new vehicle much more frequently and you do not mind paying more for luxury, then leasing is for you. If you already have multiple payments that are high, and you need a low-cost monthly car payment, this might be a good option for a limited time while you pay things off. Overall, purchasing a car is more affordable than leasing.

Published by Public Service Credit Union
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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.  

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