When Is Leasing a Car Better Than Financing?

Mar 26, 2015

Some people have misconceptions about new car leases from their El Paso Kia dealerships, since you are essentially renting the vehicle for a period of two or three years. These people strongly believe you are throwing your hard-earned money away, because you have no ownership in the vehicle. While there is no ownership during the lease period, where people with this type of thinking quickly get into trouble is by trading in their vehicles every two or three years for a brand new model. Eventually, they are underwater on their car and find their monthly payments have grown out of control.

How does this happen? They get the urge to have the latest features and options, and decide to trade in their current vehicle. Let’s assume the current vehicle is several years old and is fully owned. The value of the trade-in is deducted off of the purchase price of the new car at their Kia dealer in El Paso. They finance the remaining balance and drive the car home.

A few years later, they decide they want a new car. The only problem they have is they still owe three more years of payments on the current vehicle. Luckily, the new car dealer is able to take their car in on trade and pay off their existing car loan. However, since there is a balance owed on the vehicle, it lowers the cash left over. For example, the trade-in value is $10,000, and the pay-off on the loan is $9,000. This only leaves $1,000 to be deducted off of the new car’s purchase price. Regardless, they decide to go ahead and get the new car.

Now, two years down the road, they want to do the same thing. The only problem, this time, is since there was only $1,000 down payment, they discover they owe more on the vehicle than it is worth. Fortunately, their new car dealer in El Paso can work with them and help get them into a new car. Again, let’s assume the trade-in value is $10,000, but now the pay-off on the loan is $13,000. Instead of reducing the purchase price of the new vehicle, the extra $3,000 is added on, increasing the total amount financed. Remember, any time the amount financed increases, so do the monthly payments.

Say this person repeats this pattern of buying and trading in a vehicle every two years for the next ten years. At the end of that time, they could easily have monthly car payments as high as $1,000 or more, compared to a leased vehicle with a monthly payment of $300 or less. In actuality, the person has no equity in the financed vehicle and is throwing away their hard-earned money without gaining any benefit by refinancing their car every two years.

On the other hand, if they had leased a new vehicle every two years, their payments would remain consistent over the ten year period. In addition, they would have more money in their pocket, rather than an increasing monthly car payment. For anyone who likes to drive a brand new car every two or three years, leasing is a much better financial choice.

To learn more about leasing a new Kia from us, here at Integrity Kia, call us now at 915-856-2982.