Buying or Leasing A Motor Vehicle

This document is intended to provide consumers with information regarding a specific topic. It is not meant to provide comprehensive information. For further questions, please contact the Consumer Affairs Division at (617) 635-3834.

Leasing versus Buying

Many consumers have questions about whether to lease or purchase a motor vehicle. Each option raises certain issues, some of which are detailed below.

  • Ownership- When you lease you do not own the vehicle. You must return the vehicle at the conclusion of a predetermined time period. When you purchase the vehicle, you own the car.

  • Up Front Lease Costs- These costs can include the first month's payment, a refundable security deposit, a capitalized cost reduction, taxes, registration and other charges.

  • Monthly Payments- When comparing leasing to buying, lease payments are usually lower because you are paying for the vehicle's depreciation plus a charge for the lease.

  • Early Lease Termination- You may be responsible for a substantial charge if you end the lease early.

  • Leased Vehicle Return- At the end of the lease you return the vehicle and pay any end of lease costs.

  • Future Value- When you lease, the company has the risk of the future value of the vehicle. When you purchase a car, the consumer incurs the future value risk.

  • Mileage- Leased vehicles are typically limited in their mileage. Many limit the mileage to 12,000-15,000 miles per year.

  • Wear & Tear- Under most leases, you'll often have to pay charges for the excess wear to the vehicle.

  • End of term- When the lease is over, you have the option to purchase the vehicle (and incur the financing charges associated with owning the vehicle) or lease another vehicle.

If you decide to lease, there are some things you should do prior to signing any agreement:

  • Negotiate. Compare offerings from different leasing agents or dealers. Look for differences in:

    • actual dollar cost of the vehicle 

    • capitalized cost reduction 

    • length of the lease

    • payment 

    • end of the lease charges 

  • Understand the financing. Insist on an itemized accounting all the amounts of the fees you will pay. Make sure there are no hidden costs.

  • Understand the lease conditions. Find out early what happens if you terminate the lease, if possible, early for any reason. Some leases totally prohibit early termination. Find out what happens if you go over on the mileage amount. Find out if you are charged for wear and tear.

  • Explore the purchase option. Find out if the leasing company offers you to option to purchase the vehicle at the end of the lease. A specific figure for purchase price should be stated in the lease agreement.

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