When it comes time for you to choose between buying or leasing your new Subaru, you want to make certain you are well informed of both options. We would like for you to make a wise decision when choosing between the two, and recommend you use this page as a guide to decide which option suits you best. If you have any questions, we would be glad to set aside some time to discuss both options and find the best solution for your situation.
Who owns the vehicle?
Whether you purchase your new Subaru outright, or finance it through any of our lenders, you are registered as the owner of the vehicle. The vehicle will be titled and registered under your name, and it remains yours until you no longer wish to own it. If you finance, you will be required to fulfill your obligation by meeting the monthly payment, and ultimately paying off the principal balance of the auto loan. The lender may also require you to carry a certain level of insurance coverage until the principal balance is settled.
If you choose to lease the Subaru, you will not be the registered owner of the vehicle. The lending institution will be the registered owner, as you act as a borrower or long-term renter of the vehicle. This remains in place until you finish your lease term, which is typically anywhere from 24 to 42 months. The lessor will require you to carry a specific minimum level of insurance coverage during this time. Once the lease contract is settled, you have multiple options, which are explained below.
What are the up-front costs?
When financing a vehicle, most lenders would typically like to see some sort of monetary commitment on your end, and this can be in the form of a cash down payment or equity derived from a vehicle you are trading in. The amount of your down payment will ultimately be determined by the lender, but it is safe to say that the more money or trade equity you put towards the loan, the lower your monthly payment. While many people attempt to obtain loans with zero money down, it may not be the wisest decision to pay interest charges on the state taxes and various motor vehicle fees. Would you really want to finance your license plate?
Up-front costs for a lease typically include the bank or acquisition fee, along with your first month's lease payment and the Department of Motor Vehicles fees. This group of fees is referred to as your "inception" fees, as they are the asked for fees at the inception of the lease. Makes sense. As with traditional financing, individuals are quick to ask for the lease with zero money down. This requires you to "roll" those up-front costs into the lease, thus increasing your monthly payment. Again, do you really want to add interest charges to the registration cost, or the bank fee?
How are monthly payments calculated?
Monthly payments when financing your Subaru will be based off of the selling price of the vehicle plus interest charges, motor vehicle fees, and our documentation fee. The down payment, and/or trade-in equity will reduce the total amount financed. This total will be divided by the number of months in the finance term you choose. Boom! You end up with your monthly payment. Choosing a longer finance term, or placing more money down towards the loan, will help in lowering the payment.
Leasing differs from financing, as you only pay for the vehicle's depreciation during the lease term, plus taxes, fees, and interest charges. Interest charges here are typically referred to as "rent charges." So, say you choose to lease a new Subaru for a period of 36 months. The bank, or lessor, already has a set residual value, or remaining value of the vehicle for a period three years from now. The difference between the selling price and the residual value is the vehicle's depreciation. This is the portion you are paying for as you drive the vehicle. Your choice of mileage option also affects the residual value, as a 10,000 mile per year lease will cost you less per month than a 12,000 mile per year lease. Following this so far? It's easy.
What are my options at the end of the purchase/lease term?
When you've come to the end of your finance agreement, and made that last payment, the vehicle is yours to keep for as long as you wish. You'll have a zero balance with the lending institution, and will have 100% equity in your vehicle. If your lifestyle changes, or you decide that it's time to upgrade to a newer Subaru, you will have that equity to put towards the new purchase or lease.
When you've come to the final payment of your Subaru lease, you'll have the option to either drop off the vehicle and pay a disposition fee, or keep the vehicle and pay off the balance. If you decide to keep the vehicle because you find that you really love it, you'll have the option to finance that amount. If you just want to terminate the lease and move on to a different vehicle, you will schedule a time to have the vehicle inspected by a representative of Subaru Motors Finance. They will most likely visit you at your house to inspect the condition of the vehicle. Once this is done you can arrange a time to drop the vehicle off here at Miller Subaru, where you'll hand over all keys and sign an odometer statement.
Is leasing a good option for me?
If you love driving a new vehicle every few years, and like a lower monthly payment, then leasing may be a good fit for you. If the lease is 36 months or less, with 12,000 miles or less, then you'll be covered under the manufacturer's comprehensive warranty for the entire period of your lease. Mileage typically maxes out at 15,000 miles per year though, so if you find the mileage limitations too constraining then you may want to consider financing. Another benefit to leasing is your equity position. Since you're only paying for the portion of the vehicle that you are using, then you'll never be in a position where you owe more then the vehicle is worth.
We encourage you to make good use of all available resources when gathering information of this type, including the knowledge of our staff. We are here to serve you, and help you choose the option that suits you best.