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When looking for a new car, many car buyers may heard of leasing, but it's not something that caught on with the average buyer until recently. If you've never heard of leasing until it was offered, you're probably wondering how it works and how it compares to outright buying a new car.
As NowCar will offer leases on new cars online when in launches in 2015, we want all of our customers to understand their options.
Unlike buying a car, in which you pay the full market price for a vehicle upfront (whether in cash or a loan), a lease is paying for the depreciation of the car over the course 2-4 years.
That depreciation is estimated, and can vary from car to car. For instance, two different cars may start with an MSRP of $20,000, but at the end of a three-year lease, one may be work $14,000 while the other may only be worth $11,000. The first car worth $14,000 at the end of three years will have much lower payments than the car worth $11,000.
Using NowCar's Steal of a Deal as an example, we started off with a 2015 Chrysler 200 Limited at $219 per month for new lessees before taxes. That is one of the best--if not the absolute best--prices car buyers can realistically find on a lease today.
That lease is for 39months, includes 10,00 miles per year, and only requires $219 down at signing.
To buy this car with the same discounts and rebates applied, at a 1,99% interest rate (very low compared to national average), you'd be looking at a $308.55 per month payment with the same $219 down with a 60-month loan.
In order to get the payment down to $218.99 per month before taxes, you'd need to make a down payment of $5,330.
When Leasing a Car is Better
From the information above, you can see that the payment for the lease on the example 2015 Chrysler 200 is much less than it would be if it were purchased outright.
For car shoppers that like the idea of having a low payment, and the opportunity to move into a new car every few years, leasing is a great option. It saves you the hassle of car ownership once the new car smell wears off, which can be stressful and expensive over time.
When Buying a Car is Better
To consistently lease a car, you will need good credit and stable income to receive the best deals. If both of those are uncertain factors in your life, buying is likely going to be a better option.
Buying also gives you the ability to sell the vehicle if you absolutely have to without being hit by early return penalties or overage charges for extra miles driven.
If you want don't think the limitations of leasing are worth the savings, buying is definitely the best option. Once you have the car paid off, you can drive payment free, save money, and decide when the right time to sell and upgrade is for you.
To get the best deal on a lease, get offers from every source you can on models that match the type of vehicle you want (sedan, crossover, SUV, minivan).
From there, compare prices and features to help narrow down your selection to those with the best mix of necessary features and low payment.
Once you've narrowed down your options, decide if payment or features are worth more to you and the choice of your new should be simple to pin down.