Should I Lease or Buy a Honda?
If you’re looking to elevate your Cincinnati commute with a new Honda, you’ve come to the right place. We have an expansive selection of new cars, trucks, and SUVs at prices to fit any budget. However, you may not know if you plan to finance or lease your new ride before shopping. As a result, the choice can be challenging for some shoppers.
Buying a new car costs more each month, but you build equity with every payment. In the end, you own your vehicle. Leasing a new car costs less money each month and enables you to afford a more expensive car. Yet, you build no equity, and you have to make the decision again in two or three years. This results in drivers entering a leasing cycle, essentially never stopping paying for a vehicle.
Buying and leasing each have pros and cons. What you choose depends on many factors, such as credit, budget, and needs. So let’s take a closer look at the differences between these two options to help you make the best decision for you. If you still have questions, feel free to call Performance Kings Honda at (513) 793-7777.
Buying a New Car
You can buy a new car in one of two ways. You can pay with cash, which most people don’t have lying around, or you can finance the vehicle. Financing isn’t complicated. You borrow the money from a bank, credit union, or the dealership itself. Then, you make monthly payments, a portion of which goes to paying interest, and the other pays off the principal balance.
The benefit with buying comes in the equity you build in the car as you pay the principal down. Once you pay off the loan, you own the car in a presumably decent condition with no monthly payment. You can sell the vehicle at any time, or you can trade the car and use that equity toward purchasing a new vehicle.
Leasing a New Car
Car prices average over $38,000, and technology changes rapidly. This combination results in many people leasing instead of buying. You lease a car by signing a contract. You commit to a monthly payment and a time frame in the contract, usually two to three years.
As a result, you don’t build any equity with your monthly payment. However, you pay much less monthly versus financing. This savings allows you to get more vehicle for your money.
If you work from home or have a short commute, crave the latest technology, and enjoy driving the newest models, leasing makes sense. However, if you prefer building equity and owning your vehicle, you’re better off buying.
Pros to Buying
As we said, you build equity when buying a car. Another upside to buying is you can modify the vehicle if you like. For instance, you can buy a 2022 Honda Ridgeline and outfit it for off-road adventuring. You can add a lift kit, light bar, oversized tires, and more because as long as you make your payments, the truck belongs to you. Leasing strictly prohibits modifications, so if you have a special vision for your new car, truck, or SUV, you’re better off buying.
Pros to Leasing
First, you get to drive the car at its mechanical best. Plus, the manufacturer covers the vehicle under warranty, so if anything significant breaks, repairs are covered.
Also, the regular service has been factored into most leases, which lowers your cost of ownership. Most people who prefer leasing love driving a brand-new vehicle too.
Another benefit is business owners or professionals who use their leased vehicles primarily for work. For example, traveling salespeople, ride-share drivers, and delivery drivers can take advantage of many tax breaks through leasing.
When the lease ends, you return the vehicle to the dealership. At Performance Kings Honda, you can purchase the vehicle from us if you fall in love with your car. You could also return your leased vehicle and lease or buy another Honda from us. Doing this will qualify you for our return incentive.
We also offer early turn-in incentives on certain models. You can contact us to see if your vehicle qualifies for this. We purchase the vehicle from you at the current residual value in this scenario. Combined with our return incentive and new or returning lease deals, this amount could get you into a new vehicle with even lower monthly payments.
Regardless of what you do next when your lease expires, you won’t have to worry about trade-in value or selling the car. Instead, you simply turn it in.
Cons to Buying
Unfortunately, when you purchase a new vehicle, it depreciates rapidly in the first three years. Therefore, should you find yourself in the position where you need to sell your car, you might find yourself upside down on your loan. Upside down refers to owing more for your car than its actual value.
Getting upside down can also hurt you if you’re involved in an accident and your car becomes a total loss. For example, you purchase a new car for $25,000, and after two years, its actual value sits at $15,000, but you still owe $18,000 in loan payments. Your car insurance will cover the $15,000, but you’re responsible for the remaining $3,000.
Cons to Leasing
Aside from starting a cycle of never-ending car payments, you have certain obligations. First, you must return the vehicle in the same condition as when the lease started, minus normal wear and tear. You must fix any additional wear and tear before returning the vehicle.
Also, you have a predetermined number of miles you can put on the vehicle, at which point you must pay an additional fee per mile over. The allowable miles and fees can vary depending on your lease. For example, if you were allowed 25,000 miles with a $1 per mile overage penalty and actually drove 30,000 miles, you would pay another $5,000 when you turn the leased vehicle in.
With a lease, you’ve committed to two to three years of payments. Should you find yourself in a position where you cannot afford your payments, you still owe this money. You can terminate your lease early, but this usually comes with early termination penalties and the balance of payments owed.
Lease terms can be negotiated, so be sure you calculate for what you plan on driving. If not, turning in your leased car could cost you money you hadn’t planned on.
If you still have questions about which option works best for you, we invite you to contact our finance department. One of our managers will walk you through both options and answer all of your questions.