VA LOAN CAPTAIN BLOG & Learning Center

Buying vs. Leasing a Car

By: Grant Moon 04/15/15 03:32 pm

Is your ride about ready for a replacement? Have you put so many miles on your automobile there are six digits showing on the odometer? At some point, it’s time to get rid of the old vehicle and buy another. Which sometimes brings up the question, “Should I buy or lease?” a new vehicle. There are pros and cons for either choice but with regard to VA loans, if an automobile loan has less than 10 months remaining before it’s completely paid off, the lender may ignore the monthly amount which helps borrowers qualify. With a lease however, when the lease is up the lender will want to know about your future plans and will count that lease payment against you even if there’s only one month left. When you turn in your leased car, what will you drive and will you finance the purchase?

Owning a vehicle means over time you will still own the car and have no more payments. You’ve just given yourself a raise, so to speak by eliminating an auto loan. You can sell the car for a down payment or trade it in but however you decide, the decision’s yours. Leasing a vehicle lets you “rent” a car for a few years then turn the car back in at the end of the lease period.

When the lease is up, most decide to lease another. Why? Because the driver is always in a newer car, typically every three years. Leases don’t require a down payment and there are fewer initial costs with a lease. Leases can be more expensive however if the person drives more than the agreed upon mileage limit. Say your agreement allows for 36,000 total miles on a three year lease. At the end of the lease period and your mileage is say 45,000, you might be on the hook for say .20 per additional mile over 36,000, or in this example, or an additional $720. The pros and cons pretty much equal each other out as it regards to ownership costs versus depreciation and it’s more of a personal preference than anything else.

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