What is the difference between Financing and Leasing?

When considering options for acquiring a vehicle, two prominent choices are financing and leasing. But what exactly is the difference between the two? Financing involves purchasing the vehicle and making monthly payments towards owning it outright, while leasing is essentially paying for the portion of a vehicle that is used over a specified term. In a lease agreement, the customer is essentially renting the vehicle from the lessor and has certain responsibilities to fulfill.

One of the customer's primary responsibilities in a leasing agreement is to ensure that the vehicle is maintained in good condition. This includes regular maintenance such as oil changes and tire rotations. Additionally, customers are responsible for any excess "wear and tear" on the vehicle beyond what is considered normal. This can include things like broken glass or damage to the interior.

Another important consideration in leasing is the mileage allowance. Lease agreements typically come with a set mileage limit, such as 15,000 miles per year. If the customer exceeds this mileage limit, they may face additional charges for excess mileage. To avoid such charges, customers should carefully consider their anticipated driving needs and select a lease with an appropriate mileage allowance. If they expect to drive more miles than allowed, they may be able to pre-pay for additional miles at a lower charge. Take advantage of our Online Finance Application and get the loan process started today!

What Are The Customer's Responsibilities in a Leasing Agreement?

When shopping for a lease, there are several things customers should look for. Firstly, it is important to find a lease that offers a guaranteed purchase price at the end of the lease term. This provides the option to buy the vehicle if desired. Additionally, customers should ensure that the lease includes gap protection. This protection covers the difference between the insurance settlement in the event of a total loss and the remaining lease balance. Coast Mazda Port Richey, for instance, includes gap protection in their leases to avoid additional charges for the customer.

It is also important to note that terminating a lease early or returning the vehicle before the lease term is complete may come with a fee to the leasing company. Customers should carefully consider the duration of the lease and their future plans before signing any agreements.

What Is Excess "Wear and Tear" and Excess Mileage?

The customer is also responsible for "excess wear and tear" as defined in the lease agreement. Examples of excess wear and tear vary by lessor but may include broken glass, damage to the body and trim (minor paint chips or scratches are generally not considered excessive), torn, damaged or stained interior, missing parts or equipment, and mechanical conditions that cause noisy, rough or improper operation. Following the maintenance schedule recommended in the owner's manual can usually prevent minor excess wear and tear.

What about Excess Mileage?

According to the "Automotive Lease Guide" (ALG) lease residuals are based on 15,000 miles per year. Sometimes customers are presented "low mileage" leases that are typically 10,000 or 12,000 miles per year. This may be improper if the customer has said that they'll drive the vehicle the standard 15,000 miles per year.

It is common for a customer to think that if they put a lot of miles on a vehicle that leasing will not work for them. Quite contrary, a lease, if structured properly to account for the anticipated usage can benefit the customer as well. The customer is responsible for any miles driven over the total mileage limit determined in their lease agreement. If the customer knows they'll be driving more miles than normally allowed, and they still desire the benefits of the lease, the leasing company may allow the customer to pre-pay for additional miles up front, usually at a lower per mileage charge then if paid at lease maturity.

What Should A Customer Look For When Shopping For A Lease?

A guaranteed purchase price including the amount of the buyout at lease end. Gap protection - When an accident, fire or theft results in the total loss of the leased vehicle, there is typically a difference between the customer's insurance settlement and their cost to end the lease agreement. With some leases the customer is responsible for this difference. Nearly every lessor Coast Mazda utilizes has lease agreements that provide gap protection to ensure that our customers are not responsible for any additional charges over and above the insurance settlement (except for their insurance policy deductible) The option for early termination or return of the vehicle before lease-end(Note: There may be a fee to the leasing company to exercise this option.