Differences between Car Lease and Purchase of a Car

Planning to own a car? You could go for either for leased or purchased one. There are certain differences between a car lease and car purchase. Thus, in case of buying a car, once the payment is done, there will be no relation between the buyer and the seller. On the other head, in case of lease, one who give the car on lease and the other who takes the leased car are bonded by agreement for a number of years/months certain period, and with some conditions. They are distinct features as in many factors like ownership, payments, taxes, etc. Now we will discuss about them.

  • Payments: In case of leasing the person have to pay only the agreed amount for a particular period usually per month. And in purchasing of a car the buyer have to pay the installments or loan payments every month. Generally the installments in the lease is lower than the installments in the purchasing on finance. As well in the purchasing case additionally the expenses like finance charges taxes etc are included.
  • Vehicle return: When lease period is completed simply settle the amount at the end to the lease given person and give back the car. In case of Purchase, have to sell the car. Both the cases profit and losses will be there. When the lease settlement amount is higher it should have to be consider a loss. In case of purchase based on the car purchased price, time of use, depreciation and the sold price.
  • Warranty expiration: The warranties given by the manufacturers are limited from two years to three years. Lease is generally taken for one year to three years. If it is a new car, entire lease period the car is under the warranty coverage of manufacturer. When it is a financed purchased car, the warranty period can expire after some period.
  • Ownership: Lease is not the ownership. The car can use by the person who taken it for lease only for any modifications must have to ask the person who has given the car for lease. In purchase of a car the ownership is immediately transferred to the buyer.
  • Mileage: Some lease companies give the cars based on the mileage. If the lease taker is traveled more than that distance in the agreed period have to pay extra to the company. In case of purchase there are no such restrictions.
  • Future value: The lessee does not have any future value risk or market value risk in future regarding to car. But the buyer have to bare the market risk for his car.
  • Frequency of changing: If you want to change the cars take lease. Leasing have the advantages of changing because of you can return after the lease period is completed and take new one. If you don’t want to change the car frequently buy the car.

Based on the above differences, decide which is the best one for you. Both are having some advantages and disadvantages. So select the best option based on your requirements and habits.


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