Lease or Purchase?
What's Right for Me?
There are many factors that contribute to determining whether a lease or purchase of a new vehicle is right for you. Both options have their benefits and the decision is based on both financial needs and lifestyle desires. Deciding whether to lease or buy your next Honda is an important decision that should be an informed decision. If you don't find the information you are looking for on this page or have more questions fill out the contact form to the right and our Customer Care Center will contact you to answer all of your questions.
Terms to Know
- Residual Value - The expected depreciation of the vehicles value over the life of a lease.
- Guaranteed Future Value - The value of your vehicle at the end of the lease term regardless of depreciation.
- GAP - Guaranteed Asset Protection.
- Equity - The difference between what your vehicle is worth and what you owe on it.
- Money Factor - Amount you will pay in finance charges.
- APR - Annual Percentage Rate
- Depreciation - A reduction in the value of your vehicle over time.
| Purchase | Leasing |
|---|---|
| Monthly Payments are higher than lease payments because you are paying for the entire price of the vehicle. | Monthly payments are much lower than your payments when purchasing. |
| Usually a down payment required to ensure that loan amount does not exceed market value of the vehicle. |
Usually no down payment required. Making a down payment will only lower your lease payment. |
| When you have paid the full amount of the car loan you own the car. |
Newer vehicle more often - your preferences may change over time and a short lease term allows you to drive the vehicle of your choice. |
| Modify and add accessories to your vehicle with as you see fit. |
Guaranteed Future Value - Resale value is not a concern. |
| There is no restriction on the amount of miles you drive, although higher mileage will reduce the resale value of the vehicle. |
Pre-determine that your mileage will not exceed a certain amount per year. |
| Car loans will often extend beyond the warranty period unless an extended warranty is purchased meaning you are subject to repair costs. |
Your Honda is covered by the manufacturer's warranty for the entire period of your lease. |
| There are maintenance and upkeep responsibilities and any wear and tear will effect the resale value of your vehicle. |
No hidden fees upon lease return or purchase. |
GAP Insurance Included
When leasing your brand new Honda, GAP (Guaranteed Auto Protection) is included. This is very important and covers you from unexpected costs that can often be out of your control. If your car is totaled in an accident or stolen you can be responsible for any lapse in insurance coverage. Your insurance company will only cover what the current market value of your vehicle is. Many times when purchasing a new vehicle, because of depreciation, you owe the bank or lending institution more than the current market value of your car. When this occurs, as it does far to often, you are responsible for that extra cost. For example:
"The insurance company determines the current market value for your vehicle is $15,000. The total amount that you owe the bank is $17,500. Without GAP insurance if your car is stolen or totaled you will be responsible for paying the bank that extra $2,500."
Gap Insurance is available with the purchase of your new Honda but at an additional charge that can be added to your monthly payment.
What is Leasing?
Leasing is an easy and affordable way to get a brand new Honda with little or no down payment. Monthly payments are lower with a lease than when purchasing the vehicle because you only pay for a portion of the vehicle and only pay sales tax (where applicable) on that portion. People who use their car for business, trade in their vehicles regularly (every 3 years), want to know their monthly expenses up front typically choose to lease.
There are, however, certain limitations and restrictions when leasing so be sure to make an educated decision. At Paragon Honda, our sales and leasing consultants are experts that can easily determine which situation is right for you. When your lease term has expired there are a few options available to you:
- Sell or trade the car. If your car is worth more than pre-determined Value of your car at lease end then you can keep that difference in your pocket or put it towards a new lease or purchase.
- If you have fallen in love with your new Honda you have the option to keep it. Your monthly payment will be based on pre-determined value of the vehicle which was established at the beginning of your lease.
- If your vehicle is worth less than the pre-determined value you can walk away from it with no negative equity and decide to either lease or purchase a new car.
Purchase
When you purchase a new vehicle you are paying for the entire cost plus fees and any interest decided by a lending institution based on credit history. The biggest advantage to purchasing a car is that when the loan is paid in full you own the car. For someone who usually keeps their vehicle for more than 5 years or through the life of the loan purchasing the vehicle makes the most sense. With a lease you are paying for higher rates of depreciation up front but when purchasing a new Honda you are lowering that annual cost of depreciation.
A Look at the Numbers
"If you decide to lease a $40,000 with a residual value of 75% ($10,000) after the typical 36 month term, you will pay $10,000 plus any finance charges or fees over the term of the lease. For customers that live in a state with sales tax you will only pay the taxes based on that amount, not the entire amount of the vehicle.
"If you decide to purchase the vehicle you will be responsible for the full $40,000 plus any finance charges and fees. The taxes will be based on the entire amount of $40,000."
This illustration shows why leasing typically provides a much lower payment than purchasing. Leasing will offer you lower payments with little to no equity at the end while Purchasing will have a higher payment with the possibility of more equity, though it will depreciate over time.
The Mileage Factor
When leasing a vehicle it is important to have a general idea of the amount of miles you drive per year. The typical Honda lease is 12,000 miles per year but you have the option of leasing a vehicle with up to 33,000 miles per year. When you turn in your lease at the end of the term there is a mileage penalty assessed for additional mileage. That penalty is $0.15/mile on a vehicle with an MSRP of under $30,000 and $0.20/mile for a vehicle with an MSRP over $30,000.
If you have any questions fill out the contact form and a member of our Customer Care Center will contact you shortly!