Leasing vs. Financing a Toyota from the Dealership: Which is Best for You?

So, you’ve finally gotten tired of your old ride, or maybe it just finally gave out on you. Either way, you’ve found yourself in need of a new car.

Unless you have an inordinate amount of cash saved up, you have two main options: financing or leasing. So, which is the right move for shoppers in LA County? Well, the answer to that depends on your situation. Let’s go through the pros and cons of leasing and buying.

In our experience, the best way to figure it out is to stack them against the competition, and there are few rivals as popular as Honda. Let’s do a quick vehicle comparison of the RAV4 Hybrid and CR-V Hybrid to see if Toyota continues to reign supreme.

Leasing a Car: The Basics 

When you lease a vehicle, you’re agreeing to rent it for a predetermined period of time; in that way, it’s not unlike signing a lease for an apartment. A lease term typically lasts two to three years, and after the lease is up, you simply drive to the dealership, hand over the keys, and go on your way.

Lease payments are calculated by considering the projected depreciation over the course of the lease term.

Advantages of Leasing a Car

Since they’re typically new cars, leased vehicles are nearly always covered under the manufacturer’s warranty. 

Here are some reasons you might want to lease your next vehicle:

• Lower Monthly Payments: One of the most salient bonuses of leasing a car is that you can usually get a much lower payment than you would if you’d financed the exact same model. This is because the payments are only taking the expected loss of value over 2 to 3 years into account, as opposed to a traditional loan, which requires you to finance the entire value of the vehicle.

• Enjoy the Newest Models and Features: Cars that are up for lease at dealerships are pretty much all nearly brand-new. This means that you’re getting a model with the best safety, infotainment, and comfort features available.

• Warranty Coverage: Since they’re typically new cars, leased vehicles are nearly always covered under the manufacturer’s warranty.

• Reduced Service Bills: Because you’re driving a very new car, the likelihood of any major service bills or repairs is next to zero. You may also be able to benefit from the warranty’s service program, and some dealerships even offer lease specials that include routine maintenance.

• Lease-End Buyouts if You Like the Car: Not many people think about this, but there is an option to buy the car at the end of the lease term. The purchase price is usually agreed on at the start of the lease, and this can actually be beneficial to the lessee if the value of the car ends up rising, which will allow them to buy it out for less than the current market is going for.

• No Ownership: Just as it goes with renting anything, eventually you’ll have to turn it in. This means that you’re not establishing equity or assets (unless, of course, you choose to do a lease-end buy).

• You’ll Have to Baby It: Lease agreements require that you keep the vehicle in decent condition, and if you don’t, you may be in for a big payment to cover any aesthetic damages. So, if you’re prone to keeping a messy car, or you have young children, you’ll need to try extra hard to keep it clean.

• Limited Mileage: Leases also start with a specific number of miles you can travel in a given year, and if you go over the mileage, you’ll need to pay out of pocket for it at the end. Long commuters or people who travel for work will need to be especially careful of this.

• Possible Fees: When you lease a car, it’s a good idea to inspect the documentation carefully, because some dealerships may include lease-end fees. You can also incur charges if you decide you want to end the lease early.

• Long-Term Investment: Any financing agreement comes with the promise that, if you make the payments, you’ll eventually own the car. This can be incredibly beneficial, especially if your car doesn’t have any major service issues after the loan is paid, which means you’ve hit the golden deal automotive ownership sweet spot of having a paid-off car with no mechanical problems.

• Flexible Finance Options: When you apply for a loan, you can customize your term—typically between 36 and 72 months—which means you get to strike your perfect balance between monthly payments and long-term interest.

• Money for a Better Car: Paying cash for a cheap car can seem tempting, and you may even be able to find one that’s truly worth it. But, if you put that money toward a down payment instead, you have a much better chance that the car will be newer, which means fewer potential problems and repair bills.

• Trade Your Old Ride In: Selling your old car can be an enormous pain, but when you buy a new one from the dealership, you can trade your old scooter in quickly and easily, and you can put the value toward a down payment.

• Helps Build Your Credit Score: There are few things in life more important than getting your credit up into a decent range. Taking on a car payment—or even cosigning for someone else—is a fantastic way to boost your credit.

• Special Dealership Incentives: Many dealerships offer special discounts and lowered interest rates for both new and pre-owned cars, and these can save you hundreds, and sometimes thousands of dollars (our Toyota dealership near Simi Valley also offers lease specials).