Buying a Car After Leasing Can Be Expensive. Here’s Why

People who cannot afford a new car right away often opt for leasing. The hope is to own the car immediately, without the burdens of the new car’s price, and then purchase the same car after depreciation has done its job. But this strategy is always the expensive alternative to buying a used car of the same quality now. With the right car dealer in Spartanburg,you are bound to find a similar vehicle where depreciation has reduced the overall cost but the years have done nothing to the quality of the vehicle.

The secret of leasing – residual value

The residual value of a car decides the monthly amount that you need to pay for the lease. Say, the MSRP of the vehicle that you decide to lease is $30,000. Your deal is for 3 years or 36 months. The salesperson will tell you that the residual on this car is 60% and you will have to pay around $330 per month, taxes excluded. Residual value is nothing but the worth of the car after that 3-year period. And you pay the difference between the MSRP and the residual value spread over 36 months. In this case, after 3 years, the value of the vehicle will stand at $18,000 and you are required to pay ($30,000 – $18,000)/36 which is nearly $330.

What makes buying this car expensive?

Manufacturers often inflate the residual value of their cars to keep the monthly lease amount down. For instance, if the residual on that same car was 50%, you would have required to pay $417 every month. Now, when you decide to buy that same car, the leasing agent will not evaluate your car. As per your deal, you will have to pay a 60% residual value to take ownership when the actual figure is 50%. Many top cars in Spartanburg, SC suffer from this inconsistency. Buyers end up paying more than what the car is worth.

The same used cars by dealers are cheaper

When buying used cars by dealers, you are not buying at the depreciated price from MSRP. You are buying at the actual depreciated amount that is evaluated then and there. Hence, you pay the 50% residual without the monthly lease fees and your net expenditure stands at $15,000 rather than the whole $30,000. The best dealer will sell you the best Toyota or the best Dodge in Spartanburg, SC. Quality will be backed by warranties and the feel will be that of a fairly new car. Rethink your options, take the financially smarter option, and save as much as you can.