Understanding what you mean by “updating”

When doing a cost comparison, it’s important to understand what the terms of your cost comparison are. Updating your car can take the form of two distinct courses of action: you could lease a new car, or buy a new car.

Let’s break down some of the key points of difference between leasing and buying to further analyze which course of action would yield the best results.

UPFRONT COSTS:

Let’s say we’re looking to update the Audi A6 Premium to its new 2018 model. The MSRP of this car is $54,040.

When leasing, you generally have some lee-way when it comes to upfront payments. There are some payments that are non-negotiables (sales tax, dmv fees, etc). But there are others that are entirely negotiable. Also, keep in mind, the more you put down upfront here, the less your monthly payment will be. People generally look to put down anywhere between $1000 to $2500.

When buying, it’s a pretty standard rule of thumb to pay 20% of the MSRP upfront, which in the case of the Audi A6, would be $10,808. Upfront, this is saving you about anywhere from $9808 to $8,308.

But upfront costs can get distorted and are hard to compare to each other. So let’s look at monthly costs.

MONTHLY COSTS:

Let’s say you put down $1000 and lease your car for 2 years with a 5% interest rate, along with the other standard things that go into a monthly payment like residual, net cap cost, etc (click here to learn more on how to calculate exact lease payments), you’d be paying about $620 per month.

When buying a car, with all things remaining equal (except you’ll probably need about 70 months to pay off the entirety of the car), you’d be paying about $720 per month.

So, again, leasing buys out.

ALL IN ALL…

Overall, leasing is going to win out buying a car for various reasons — price being the biggest one.

To get a more detailed look at leasing vs buying comparison, check out this blog.