Leasing Vs. Buying: 5 Important Thoughts for Memphis Drivers

If you’re like most people these days, you’re weighing your options heavily and paying particular attention to your personal financial decisions. Choosing an affordable and efficient means of transportation is one of these decisions, and has led many consumers to question whether buying or leasing a vehicle is the right option for their pocketbooks and lifestyle. With family vacations, working from home and a new “normal” for our communities, it’s important to re-evaluate how we’re investing in the way we travel from point A to point B.

To help you decide whether to lease vs buy a car, below are a few quick and easy items to consider:

Monthly Costs

Of course, the first thing that most people think about when they search “lease vs buy a car” in their area is the monthly finances of the purchase or lease agreement. It’s true that the monthly payments when buying a car are higher due to the fact that you’re paying on the overall cost of the vehicle and not a monthly rate like with a lease. However, at the end of a purchase contract, you own the vehicle and any value attached to it, which is a big draw to most buyers. It’s important to keep in mind, though, that most cars will depreciate fairly quickly.

At the end of a lease, you can either renew the lease or opt to purchase the vehicle in question. This type of a flexible arrangement may work best if you’re unsure whether you want to purchase or not in the long run.

Mileage Allowance

Something that a lot of leasers don’t realize is that there are regular “mileage allowances” implemented when leasing a vehicle. These allowances are put in place to keep the value of the car intact when returned, and usually only allow the renter to drive a certain number of miles per year.

According to Consumer Reports, “Most leases limit the number of miles you may drive, often 12,000 to 15,000 per year. You’ll have to pay charges for exceeding your limits, but can negotiate a higher mileage limit.”

If you simply need to lease a vehicle in order to drive to and from your office, or if you don’t drive often, this may be the best fit for you; however, any off-roading or mountain vacations may not be the best idea when leasing. Decide if you plan on having long road-trips. This can help you figure out whether you should lease vs. buy. Car owners often drive further than they think! Calculate how far you travel to and from work every day, and compare that total to your mileage allowance. Is there any wiggle room left over?

State and City Taxes

Car sales tax varies from state to state and city to city. This can impact the way you view your vehicle lease or purchase. When you buy an automobile, the state tax is applied to the total cost of the vehicle and split up over monthly payments (this results in a higher overall payment per month).

When leasing a car, the tax percentage is applied only to each monthly payment of the lease, not the car’s total value itself (resulting in lower monthly payments). You’ll have to decide if you want to pay a higher monthly tax rate and own a vehicle, or a lower rate to rent and surrender the vehicle when finished.

Car sales tax in Memphis, TN, is 7%, as is the Tennessee car lease tax. That means that Memphis is a unique case compared to most of the country, in that other states have considerably higher lease taxes. Locals in Memphis can consider leasing without the harsh consequences of a higher tax.

When looking to lease vs buy a car, always research your local state and city sales tax. Car and Driver has a variety of resources on Tennessee tax laws and guidelines.

Vehicle Ownership

There are a few ways to look at ownership in terms of leasing a car vs buying a car. When you buy, you own; the value of that car and the equity you have in it are all yours. When you lease, you may not have equity in the vehicle, but you also are not as invested in the depreciating value of the car and can walk away from it at any time. The choice that is better for you depends on where you are in life and what type of commitment you want to make to a vehicle.

Also, if you are a driver who enjoys “customizing” your vehicle and making it your own, leasing may not be the right option for you. Any customizations to your leased vehicle must come off before it is returned, and you must pay any damages made to it during that time. If you buy your car, though, it is yours to do with as you see fit.

Another viable option for leasers on the fence is the Ford Lease-to-Own program. Talk to our experts to see if there are any current Ford lease-purchase deals going on.

Vehicle Depreciation

When deciding whether to lease or buy it’s important to note that the depreciation of a vehicle affects the buyer and the leaser in two very different ways. When you lease, you are responsible for returning the car in “saleable” condition at the end of the term and must pay any damages for the time you rented it. For the buyer, however, depreciation only affects you when you go to sell or trade in your vehicle. Your decision in this case may depend on whether you’re looking to invest in the total resale value of your vehicle and maintain equity in it over time or are simply looking to rent a temporary mode of transportation that will not affect your future finances. Also, some car models depreciate faster than others, which is something to consider when looking at sports cars and pickups.

Make sure to visit our finance center where you can fill out a pre-approval application for your choice of Ford vehicle. Whatever your decision, leasing or buying, Ford of West Memphis is here to help you find the car that’s right for you and your lifestyle in today’s busy world.

Posted in Ford of West Memphis Service | No Comments »