While I have read through many of the pro and con questions I have a more specific question about the mileage penalty. How big is the penalty? I drive a lot for work, estimating about 28,000 - 30,000 miles per year. How bad would the mileage penalty be for me if I leased a car rather than bought a car? Would it still be worth chosing to lease rather than buy?
2007-12-28 08:07:04 · 4 answers · asked by GenesisM 2 in Cars & Transportation ➔ Buying & Selling
Leasing is an alternative form of financing. Both have fixed terms and payments. With a purchase you finance the whole price of the vehicle and pay that amount, plus interest, back to the finance source. With a lease you also finance the full price of the vehicle, and pay all the interest. You only repay part of the principle of the loan. A lease has an estimated value of the vehicle at the end of the lease term. (Residual value) This is deducted from the principle and you only pay the difference in your monthly payments.
For example:
Assume a vehicle that costs $30,000 and a trade in worth $5000. Also assume you are financing, or leasing the vehicle for 5 years. A final assumption is that at the end of the 5-year period, the vehicle is worth $7500.
With a purchase you would pay back $25,000 plus interest over the period of the loan. You would own the vehicle (worth $7500) You can keep it, or trade it in on a new vehicle
With a lease you pay back $17,500 ($25,000- $7500 residual value), and the interest that is charged on the $25,000.
Your payment is less, but at the end of the term you have nothing!
With a lease there is a limit on the number of miles you can drive and a per mile charge after that. You are also responsible for any and all damage to the vehicle. At the end of the lease, when you turn the car in, you will have to pay for any and all damage and over miles charges!
With both a lease, and a purchase, you are responsible for all maintenance. Some leases, but not many, may have a maintenance program, but that does cost extra, and will increase your monthly payment.
A lease can be written that allows for the extra mileage, but the payment will be more. For example if the "normal" lease allows 15,000 miles a year, and has a 20 cent per mile over mileage charge, you could increase your monthly payment by about $250 per month. What you are really doing is paying the over mileage fees as part of your payment!
In your case, compare the cost of leasing (with the additional mileage included) to the cost of buying. I think you will find that you are better off purchasing the vehicle!
2007-12-28 08:38:01 · answer #1 · answered by fire4511 7 · 2⤊ 0⤋
For high miles I would think purchasing is best. Also, I know some states make you pay taxes on the full price of a leased car even if you don't own it so check into that as well. And.... good luck.
2007-12-28 08:11:43 · answer #2 · answered by Anonymous · 3⤊ 0⤋
you can buy the miles upfront but it will change the payment and you will end up paying the same if not more monthly than a finance loan also if you plan to buy the car and keep it at the end of the lease miles wont make a difference you will just pay the lease end value period and nothing else the car can have 60,000 miles on it but if you buy it theres no charge hope this helps (finance manger at a dealership 11 years )
2007-12-28 08:38:16 · answer #3 · answered by daniel s 2 · 0⤊ 3⤋
I wouldn't. They usually only allow 12-15K a year and its a pretty penny if you go over the mileage. You may be better off with buying it. Plus, you will own it in the end and have an asset!
2007-12-28 08:11:13 · answer #4 · answered by T19 4 · 0⤊ 4⤋