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To lease or not to lease? That is the question. When leasing first appeared on the landscape, it was for businesses wanting to operate automobile fleets while avoiding the maintenance expenses that go along with ownership. On the fleet level, leasing was only an option for specific companies. Smaller companies and individuals had only one choice--to buy. Then something happened--individual leasing came into being. Now, leasing is a viable and popular option for individuals and companies that do not require a fleet of vehicles. Lease or buy? This has become a question that every Landscape Contractor now considers when purchasing new vehicles, such as work trucks. Advantages and Disadvantages LEASING Leasing has multiple advantages and disadvantages, just as buying does. First, consider the following advantages: Lessors only pay for the cost of depreciation, not the purchase price, therefore payments are often lower. In many cases, a down payment is not necessary; however, it will lessen the monthly payments. There are potential tax advantages to leasing (always confer with an accountant to determine whether or not any apply). At the end of a lease term, a vehicle can be returned or purchased. Leasing often allows the consumer to lease a more expensive vehicle than they could afford when financing to purchase. And, of Course, the Disadvantages If a lessor decides to purchase a vehicle at the end of a lease, it can sometimes cost more than it would have to finance the vehicle from the outset. There are early termination charges should a lessor end the contract prematurely. A vehicle must be returned to the specifications and configuration that it was in when first entered into the lease. Upgrades and modifications are not typically allowed. Insurance premiums may be higher on a leased vehicle. A lessor gains no equity in the vehicle. A Side by Side Comparison Closed-end leases are the most common type of lease. The more information a consumer has, can help when comparing offers and negotiating lease deals. According to the Federal Reserve Board, there are a few key terms and definitions to be aware of when confronted with the closed-end lease vs. buy decision. o Definitions LEASING: Lessors do not own the vehicle and must return it at the end of the lease. BUYING: Buyers own the vehicle and get to keep it at the end of the financing term. o Up-Front Costs LEASING: Up-front costs may include the first month's payment, a refundable security deposit, a capitalized cost reduction (like a down payment), taxes, registration and other fees, and other charges. BUYING: Up-front costs include the cash price or a down payment, taxes, registration and other various fees. o Monthly Payments LEASING: Monthly lease payments are usually lower than monthly loan payments because lessors are paying only for the vehicle's depreciation during the lease term, plus rent charges (like interest), taxes, and fees. BUYING: Payments are usually higher because buyers are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees. o Vehicle Return LEASING: At the end of the lease, lessors have the option to pay any end-of-lease costs, and "walk away." BUYING: Buyers can buy or sell their vehicle. o Mileage LEASING: Most leases limit the number of miles a lessor may drive (often 12,000 to 15,000 per year). BUYING: Buyers have no limits with mileage, but higher mileage will lower the vehicle's trade-in or resale value. o Excess Wear LEASING: Leases commonly limit wear to the vehicle during the lease term. A lessor will likely have to pay extra charges for exceeding those limits if you return the vehicle. BUYING: There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the or resale value. o End Of Term LEASING: At the end of the lease, a new payment can be made to finance the purchase of the existing vehicle or to lease another vehicle. BUYING: At the end of the loan term, there are no further payments. Reference Materials Federal Reserve Board. A Consumer Guide to Vehicle Leasing, 2002, www.federalreserve.gov/pubs/leasing/guide.htm. National Institute for Consumer Education. NICE Mini-Lessons--Cars and Housing--Auto LEasing, 2002. www.nice.emich.edu/lease.html.

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