Finance vs Leasing
Purchase loans and leases are different methods of automobile financing. Leasing is not the same as renting a car. A lease is the financing of the use of a vehicle. A purchase loan is the financing of the ownership of the vehicle.
When making the buy or lease decision, look at a financial comparison and at your personal priorities (i.e. what is important to you).
Leasing A Vehicle
With a lease you are in effect financing a portion of a vehicle's cost: that is, the depreciation between the time of purchase and the end of the lease term. A down payment is not required on a lease, but it will lower the monthly payments. Sales tax is only paid on the monthly payments, not the full price of the vehicle. The first payment is due at time of signing.
Financing A Vehicle Purchase
When buying a vehicle, the amount of miles you drive and how long you keep the vehicle are not factors. Monthly payments will be higher because you are financing the entire value of the vehicle. Typically car buyers will make a down payment in order to 1) obtain credit and lower the interest rate, and 2) lower the cost of the monthly payments. The first payment is made a month after signing the contract. The vehicle may be sold or traded at any time.
The lease payment is comprised of the depreciation charge and the finance charge. Depreciation compensates the lender for the vehicle, and the finance charge is the interest on the money the lender has tied up in the vehicle. The leasing company holds the title of the vehicle.
The loan payment is comprised of the principal charge (cost of the vehicle) and the finance charge. The bank holds the vehicle title until the loan has been completely repaid.
In summary, leasing generally benefits customers wanting to save money on monthly vehicle costs and whose lifestyle is predictable enough to allow for mileage limitations are who maintain their car in good condition. Buying is generally preferred by customers who drive a lot and who like to pay off a vehicle so that they no longer have monthly payments.
If you have questions about buying or leasing a new or used Honda (or any make, for that matter), please contact us and we will be happy to help you understand the process.