Re: Buy or Lease?
Couple of things to consider regarding leasing...Most States mandate that the lease comes with Gap insurance. They can't charge for Gap insurance, so they usually bury it in the "acquisition fee". If the vehicle gets stolen or totaled, you simply walk away, and the Gap insurance pays the leasing company the difference between the depreciated value of the vehicle, and what is owed to the leasing company. This is why it usually does not make any sense to put money down on a lease. If you do put money down, and the vehicle is a total loss, you lose your down payment.
The three questions to ask before leasing are (1) What is the residual value of the vehicle at lease end? As an example, a $50,000 vehicle that has a 50% residual at 36 months, means that you are paying $25,000 over the term of the lease, plus interest charges. This is why it may be cheaper to lease a BMW than a Mitsubishi, as the BMW has a higher residual value.
(2) What is the Money Factor? Money Factor is actually the interest rate. It is expressed in decimal, ie: .00234 to confuse the buyer. Multiply the Money Factor times 2400 to find out what the actual interest rate is: ie: .00234 x 2,400 = 5.616% interest rate. Captive finance companies like Chrysler Capital, BMW Finance, etc, usually have better money factors and residuals than independent leasing companies.
(3) Ask what the Capital Cost is. This is the actual selling price from the dealer to the leasing company. People who lease are many times only concerned with what the "monthly payment" is. Never tell the salesman what you want to pay a month, as this is probably what you will end up paying. In this event, you may end up paying M.S.R.P. for the vehicle.
On a purchase, any down payment that you make is lost in the event of a total loss. If you don't put any money down on a purchase, and there is a total loss, you may end up paying for a car you no longer have..assuming that the depreciated value of the vehicle at the time of loss is less than what is owed to the bank. Gap insurance is available for purchase on a buy, but few people opt to purchase it.
2014 GC Limited