Financing a Toyota vs. Leasing a Toyota

 There's much debate about the wisdom of buying versus leasing. There's simply no easy answer about which one is the best choice because there are trade-offs with each option. The best way to make a sound decision on the matter is to understand the benefits of each choice and consider your lifestyle, needs, and preferences. Let's take a look at the pros, cons, and what you should consider about buying or leasing.

The Benefits of Leasing

Leasing a new or pre-owned Toyota was once reserved for a select few, such as corporate customers. These days it's a common practice in every segment of the auto industry. Vehicle prices have trended upwards for years, and leasing has increased commensurately. Leasing currently accounts for nearly one-third of all vehicle sales. Leasing affords some noteworthy benefits, including no long-term financing, and the ability to acquire a more expensive vehicle that what you might otherwise be able to afford.

Monthly Payments

When you choose to lease a new or pre-owned Toyota you'll be financing the depreciation that occurs during the term of the lease, plus fees. Once the lease term has expired, you simply return the car to the dealership. This means, in most cases, a monthly lease payment will be lower than a loan payment.

Upfront Cost

Leasing is also an excellent choice when you can afford only a small down payment on a vehicle. Upon signing a lease, the lessee will typically be required to pay the first monthly payment, acquisition fees, any other fees, a security deposit, and applicable taxes. The more money you can put down upfront, the lower your monthly lease payment will be.

Total Cost of Ownership

Leasing offers the benefit of a predictable total cost of ownership. A three-year lease term is the same as bumper-to-bumper warranty offers on most new car purchases, and most repairs are covered under the lease term. When leasing, you are responsible for standard maintenance costs, like oil changes, tire rotations, and manufacturer recommended maintenance. Failing to follow through with proper maintenance can result in additional fees upon termination of the lease.

No Long Term Risk or Obligation

If you're someone who enjoys driving a newer model car with the latest tech and safety features, leasing may be a better choice. Additionally, you'll never have to worry about trade-in or resale value. Assuming you've honored the terms of the lease, once the lease expires, you simply return the car to the dealer and walk away with no further obligation.

The Benefits of Buying

Buying a new or pre-owned Toyota may be a better option than leasing if you want to keep the vehicle long term. You will own the vehicle outright once the loan is paid in full, and assuming the vehicle depreciates more slowly than the life of the loan, you will have equity in the vehicle at the end of the loan's term. Once the loan is paid off, continuing costs include only gas, insurance, and repairs. Additionally, you're free to drive your car as many miles as you wish without additional penalties.

Monthly Payments

Loan payments when buying a vehicle, as compared to leasing, are typically higher. However, bear in mind you are buying the vehicle outright. Once the last payment is made you own the car, including the residual value. Toyota has an excellent track record for resale value. The Toyota 4Runner, for example, is ranked by Bankrate as one of the top 10 vehicles for resale value and holds 63.2% of its original value after 3 years, and 54.3% of its value after 5 years.

Upfront Costs

The upfront cost of purchasing a new or pre-owned Toyota includes the cost of a down payment. The required down payment may be affected by your credit score. Those with good credit may be able to purchase a vehicle for little or no down payment, but those with poor credit scores will pay more. The down payment may be lower if you choose to do a trade-in.

Total Cost of Ownership

The total cost of ownership of a vehicle is unpredictable, but buying does offer some substantial benefits, such as no risk of additional mileage fees and no penalty for any damages beyond wear and tear. The cost of insurance, maintenance, repairs and fuel should be factored in but can vary considerably. Purchasing a car with outstanding safety features and a strong track record of reliability and safe driving practices are your best hedge against a high cost of ownership. Consumer Reports has consistently ranked Toyota models very highly for reliability.

Future Value

When you purchase a vehicle, you own something of real value at the end of the life of the loan. You may resell the vehicle and recover a significant portion of what you paid for the vehicle. You may trade it in toward the purchase of another vehicle, substantially lowering the amount you'll need to finance for the new vehicle. Alternately, you may simply keep choosing to drive the car for the rest of its useful life, free from payments.