What is a Lease?
Use of a product for a fixed period of time at a stated payment with no form of ownership included.
A simple definition: A non-equity purchase.
Purchase of Vehicle: Exchange of Money for a product.
When you buy, you pay for the entire cost of a vehicle, Regardless of
how many miles you drive it. You typically make a down payment, pay
sales taxes in cash or roll them into your loan and pay an interest rate
determined by your loan company, based on your credit history. You make
your first payment a month after you sign your contract. Later, you may
decide to sell or trade the vehicle for its depreciated resale value.
In reality, at the end of the typical five-six year loan period you may
well own the car, but chances are you really wanted to trade it in a
year ago or earlier. Since this is a depreciating asset, it loses value
over time with some makes and models depreciating faster than others.
so, the car you now own and don't really want and isn't worth very much
when you try to trade it in. However, pride of ownership is important to
many consumers; others just want to drive a vehicle till it falls
apart!
When you lease, you pay only a portion of a
vehicle's cost, which is the part that you " use up" during the time
you're driving it. You have the option of not making a down payment,
you pay sales tax only on our monthly payments (in most states), and you
pay a financial rate, called money factor, this is similar to the
interest on a loan. You may also be required to pay bank fees that you
don't pay when you buy. Note that Subaru does not require a security
deposit. You make your first payment at the time you sign your
contract-for the month ahead. At lease-end, you have three options
regarding the disposition of the car.
1. Keep
the car because you are in love with it. You pay based on the guaranteed
future value (GFV) established when you originally leased the car.
2.
Sell or trade the car. If the value of the car is a actually HIGHER
than the GFV, you can sell it or trade it and keep the equity (profit)
in your pocket.
3. Walk away with no negative
equity. Why keep a car that has a value lower then the GFV. At that
point you can lease or purchase another vehicle.
Mileage Matters
Subaru leases are
typically 10,000, 12,000, or 15,000 miles per year but can be customized
up to 30,000 miles to meet your particular needs. If you have a
predictable life style and driving habits where you can "guesstimate"
that your annual mileage will fall within these parameters, then leasing
is a viable option. However if you exceed the allowed miles at the end
of a lease, expect to pay .15 per mile overage fee. This is why it is
important to know how many miles you expect to drive a year.
GAP Coverage
Subaru
Leases have automatic built-in-gap coverage , while car purchases loans
almost always do not. Gap coverage, or gap insurance, pays the
difference between what you owe on your loan or lease, and what your
vehicle is actually worth if your vehicle is stolen or destroyed in an
accident. why is gap insurance important because it's very common, in
these days of long-term loans and leases, rolled-over and refinanced
loans, and little or no down payment, to be " upside down" - to owe more
on your loan or lease than your car is actually worth. This can mean
you'll still own hundreds or thousands of dollars to the finance company
even after your insurance has paid for your car that has been totaled
or stolen. This turns out to be a huge shocking surprise for most people
caught in this unfortunate situation. So, Subaru leases have built-in
gap protection, but loans do not. Your better protected with a lease,
unless you purchase the gap insurance separately at extra cost for the
loan, Tonkin Subaru offers GAP insurance on all purchase plans.
