• Honda

Kuni Honda on Arapahoe

10750 E Arapahoe Road
Centennial, CO 80112

  • : 303-708-2000

Lease vs. Purchase -- What to do?


Honda Lease vs. Purchase- What to do?

For many people, an automobile lease is a viable alternative to buying the vehicle. Depending upon your individual needs, driving patterns and monthly budget, leasing can be a very affordable financing option.

Below is a comparison of a Closed-End Lease versus a Traditional Purchase where financing is utilized. A Closed-End Lease is the most common type of lease permitting the lessee the option of walking away at lease end after paying any termination fees or purchasing the vehicle at lease end should you have a purchase option.

Lease Option

Purchase Option

Who Owns the Vehicle

In a Lease, you do not own the vehicle. You are permitted to use the vehicle and return the vehicle at lease-end or you have the option to purchase the vehicle at lease-end.

In a Purchase, you own the vehicle and are responsible for all depreciation and costs associated with ownership.

Monthly Payments

Monthly lease payments are generally lower than traditional monthly loan payments. The reason for this is that you are paying vehicle depreciation only for the term of the lease, plus any rent charges, monthly use taxes and fees.

Monthly loan payments are usually higher than monthly lease payments. The reason for this is that you are paying the entire purchase price of the vehicle, plus interest, other charges included in the loan, sales taxes and fees.

Up-Front Costs or Drive Off Charges

With leasing, up-front costs generally include: the first monthly payment, a refundable security deposit (this may or may not be waived by certain lenders), capitalized cost reduction (similar to a down payment to reduce your monthly payment amount) and any other fees such as taxes, registration and dealer handling fees.

With a traditional purchase, up-front costs generally include: the cash price of the vehicle or a down-payment and any other fees such as taxes, registration and dealer handling fees.

Termination

In a lease, there are fees for early termination. Most lease terms are for 24-48 months. Ending a lease early may be costly as leases are designed to run the original contracted term.

In a traditional purchase, you have the flexibility to sell or trade your vehicle at any time without any penalties. However, you are responsible for the loan pay-off balance. In many situations, you may owe more on your vehicle than your vehicle is worth.

Mileage Restrictions and Penalties

Under the terms of a lease, you contract for a certain number of miles to be driven each year usually 12,000 or 15,000 miles. At lease-end, if you have driven more miles than you have contracted for, you may owe a penalty based upon the number of miles over the contracted amount and this penalty is due upon lease-end. You can build in additional mileage up-front if you know how many miles you will be driving per year.

When you buy a vehicle, you are free to drive as many miles as you wish without penalty from the loan company. When you trade your vehicle, the market value will be adjusted appropriately based upon the number of miles you have on the vehicle odometer.

Maintenance Costs

During the lease, you will have to pay all maintenance costs including: oil changes, tires, alignments, etc... according to the manufacturer's maintenance schedule. Most leases are for new vehicles so the vehicle should be under manufacturer's warranty.

When you buy a vehicle, you are responsible for all maintenance costs and repair costs not covered by warranty. Extended Vehicle Service Contracts are available for most new vehicles.

Insurance Costs

You are responsible to provide insurance according to the lease contract.

You are responsible for insurance when you purchase a vehicle.

Vehicle Return

At the end of the lease term, you have the option to return the vehicle, pay termination costs (if any) and "walk-away" from the vehicle or you may choose to buy your vehicle if you have a purchase option.

If you are purchasing your vehicle, you are free to sell or trade your vehicle when you decide you want a different vehicle.

Future Value and Depreciation

Once of the benefits of leasing is that the future value of the vehicle is the responsibility of the lessor.

In a traditional purchase, you assume the future value of your vehicle and understand it is at market value when you trade or sell your car.

Excessive Wear and Tear

At lease-end, you are responsible for any unusual wear and tear on the vehicle. These could include: tires, any under-performed maintenance, dents and dings, broken windshield, etc... The standards for wear and tear are included in the lease agreement.

There are no limits or penalties to you regardless of vehicle condition as the vehicle's true value is based upon market value.

GAP Coverage

All of the leases facilitated by Kuni Honda on Arapahoe include GAP coverage. For more information and a description of GAP coverage, please visit our webpage titled "GAP Insurance 101."

With a traditional loan, you must purchase GAP coverage to protect your financial well being.

It is important that you know all of your rights and responsibilities when you lease a vehicle. In addition, it is a prudent practice to perform your due-diligence and compare different lease offers and terms, such as: Up-Front Payments including the Capitalized Cost Reduction Amount, Length of the Lease Term, Monthly Lease Payment, Lease-End Fees, Mileage Allowed and Excess Mileage Fees, Purchase Option at Lease-End, GAP Coverage.

Kuni Honda on Arapahoe is an authorized Honda Lease Center located in Centennial
, Colorado. Kuni Honda on Arapahoe sells, leases and services Honda vehicles in the greater Denver, Colorado area including: Centennial, Aurora, Castle Pines, Castle Rock, Sedalia, Littleton, Westminster, Parker, Highlands Ranch, Lakewood, Golden, Douglas County, Arapahoe County and Denver County.

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