Hawaii Automotive Consumer Guide, Free Auto Classifieds

Lease, Finance or Pay Cash?
When purchasing a vehicle this question always arises and the answer is not the same for everyone. Let's talk about financing first. If you are purchasing a vehicle from an individual, he or she will more than likely expect you to pay for the vehicle in full. So you may be borrowing the money from a bank or credit union then repaying the bank or credit union, unless of course you have the cash on hand.

If you are purchasing the vehicle from a dealer, the dealer can make all of the financial arrangements for you. A down payment is normally required, whether it's a new vehicle or used vehicle, and the amount of the down payment is dependent on the total price of the vehicle as well as your prior credit history. In some cases the interest rate charged will also be dependent on credit history and the amount of your down payment as well as the vehicle being purchased. The term (number of payments i.e. 36 months, 48 months) may vary depending on your needs and what's available to you from the dealer. Remember - the longer the term, the lower the payments usually. When you make the last payment, you own the car.

Contrast this to leasing a vehicle. The amount required as a down payment is usually less than when financing. The term is shorter and the payments may or may not be the same as when financing - depending on the vehicle. The biggest difference is that at the end of the term you do not own the vehicle - it goes back to the dealer or leasing company. You may have the option of purchasing the vehicle for what is called the residual value. You should consult your dealer for specifics before you lease the vehicle.

Paying cash is an option, however, not always the best option. The first thing that comes to mind is that there are no payments that would include interest. However, in these times there are sometimes financing options available to you at such a low interest rate that it would be smarter to finance your purchase and let your cash earn interest at a higher rate than the finance charge elsewhere. Again consult your financial advisor and ask your dealer about special interest rates.

Leasing Vs. Buying