Which is Right for You?
What is the difference between buying and leasing? It's a question that all car shoppers ask at some point. The main difference is that when you lease a vehicle, you'll only pay for the depreciation that is expected to occur while you have it. Depreciation is defined as the difference between the vehicle's current value (called its capitalized cost) and what it's expected to be worth at the conclusion of the lease (known as the residual value). Since this is always a lower amount than the full purchase price of the car, your monthly payments with a lease will often be much less than if you had financed it.
How Do Lease Payments Work?
For example, say that the vehicle you're looking at has a sticker price of $40,000, and that it's expected to lose half of its value over the three-year period of the lease. That means that both the future value and the expected depreciation would be $20,000 each. If you decide to finance the vehicle, you'll be paying the total $40,000 sticker price, whereas if you lease, you'll only be obligated for half of that.
Specifically, if you get a loan with 2.9% APR and want to pay off your vehicle in three years, you'll be paying $1,161.49 per month, which will add up to a total expense of $41,813.64. However, if you're just paying the depreciation value of $20,000 over a three-year lease with a lease money factor of .000510, you'll end up paying $586.16 per month, with the total expense being $21,101.76.
Visit Motor Werks Cadillac of Barrington
Whether you find yourself debating lease vs. buying, or if you know exactly what you want, we'll be happy to help when you visit Motor Werks Cadillac of Barrington. You can find our dealership at 206 North Cook Street in Barrington, just north of East Main Street.