Leasing versus buying a car: differences between the two
There are a number of differences between leasing and buying a vehicle. In truth, these differences are applicable to most lease transactions, not just vehicles.
Think of a lease as borrowing or renting the vehicle you are leasing. The ownership of the vehicle is not transferred to you as the lessee. Instead, it remains the property of the individual or company who is leasing the vehicle to you. The lease gives you the right to use the vehicle that is being leased for the duration of the term of the lease contract.
When you purchase a car and get to the end of the term, you own the car and never have to make payments again. With a lease, however, once the term of the lease is over you must return the vehicle to the owner. You do not keep the vehicle. Note that most car leases allow for the lessee to purchase the vehicle at the end of the lease but that is a separate transaction from the original lease itself. Once the lease is over you, as the lessee, have no further right to use the vehicle and no further obligation to the lessor to make payments.
Vehicle lease agreements may also contain other clauses and addendums that provide for additional responsibilities, rights, or options for the lessee that may be executed at the end of the lease term. As noted above, one of these options is to purchase the vehicle at the end of the lease. This, effectively, restructures the deal and allows the lessee to gain ownership of the vehicle that had been previously leased.
Purchasing a vehicle is entering into an agreement with the current owner of the vehicle that provides the terms under which you, the buyer, gain ownership of the car or truck you want to buy. The vehicle purchase agreement will outline the purchase price and the purchase terms. The purchase price can be paid for immediately, up front, or, in most cases buy amortizing the purchase price over time by using vehicle financing. It is important to note that, during the financing period, you are not, technically, the “owner” of the vehicle. When you are financing a vehicle, the individual or institution that has financed the vehicle is still the owner. You will not take title until you make the final payment of the lease term agreement.