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Financing or leasing a vehicle are both great options to help you get behind your dream Mercedes-Benz. Each has specific pros and cons which you may want to consider before you pull the trigger on a deal.
We give you the rundown of major pros and cons for each option, giving you the tools you need to make an informed decision with your next Mercedes purchase.
Financing a Mercedes-Benz
Pros of Financing a Car
- No Mileage Limits - Leasing a car means that you'll have restrictions on mileage. When you own a car, you can drive it as much as you want. If you drive a lot of miles, buying a car makes much more financial sense than leasing one. On a lease, you will have to pay extra if you go beyond a certain mileage per year. When you finance a car, there's no additional charge to drive your car mile after mile.
- Eventual Ownership - When you finance your vehicle, its title will be held by the dealership until the loan is paid off. You'll build a bit of equity with each month's car payment. Lease customers can never build up equity on their vehicles. Eventually you will own your vehicle, after which you can sell it for profit, trade the car in, or make modifications to the vehicle. It's yours!
- No More Monthly Payments after Ownership - If you like the idea of keeping your monthly overhead low, then financing offers a significant advantage over leasing. If it takes you 4 years to pay off an auto loan and you keep a car for 7 years, that's 3 years that you'll be without monthly payments!
Cons of Financing a Car
- Unknown Resale Value - You won't know the exact resale value of your car until after you have paid off your loan. While you might be able to have a rough long-term estimate, there are many factors which are out of your control. If you purchase a car that gets a bad reputation for reliability, for example, it can significantly lose its resale value. Other negative factors include bad press or the popularity of the model itself. On the other side of the coin, a brand such as Mercedes-Benz has proved the test of time when it comes to reliability, prestige, and of course, resale value. But once you have your dream car, why would you want to get rid of it?
- Financing Often Requires a Down Payment and Higher Monthly Payment -Â The greater your down payment, the better your financing terms will be when you buy a car. A sizable down payment lowers your loan-to-value ratio and makes your car loan less risky to a financial institution or other lender. On the flip side, you can get away with a smaller down payment when negotiating a lease, especially if you have a good credit score.
- You May Pay More Sales Tax -Â In most cases, you only pay tax on the amount due and the monthly lease payments. When you buy, you have to pay tax on the entire cost of the vehicle. This can be a confusing area for many buyers, so our financial team will be more than happy to go through the numbers with you.
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Leasing a Mercedes-Benz
Pros of Leasing a Car
- Drive a New Car More Often - After your new car is paid off, it ceases being new. With a leased vehicle, you get to drive a new car more often. You will always have the benefit of driving a car with the most up-to-date technology, comfort, and safety features.
- No Hassle of Re-selling or Negotiating a Trade-in - Once the lease term expires you can simply return the vehicle or choose to initiate a new lease for a different vehicle. You will never have to go through the hassle of selling a vehicle yourself or have to negotiate a fair trade-in value. You may also have the option of purchasing your leased vehicle based on a pre-set price.
- Fewer Repair Expenses - Since you're covered by a manufacturer warranty during your lease term, you won't have to worry about getting hit by a large repair bill. However, you are still responsible for regular upkeep and maintenance. Our service center can help ensure that your car is properly maintained during it's lease term.
Cons of Leasing a Car
- Additional Leasing Costs - Lease payments are based on the difference between the car's sticker price and the projected value of the car at the end of the lease. On top of that, you've got a set interest or lease rate that is paid to the leasing company. Add in an acquisition fee at the start of the lease, or a disposition fee at the end of the lease, or both. This may add up to thousands of extra dollars that you'll never recoup because you'll never own the car.
- No Vehicle Ownership - Leasing, much like renting an apartment, means that you don't own the car. This means you can't do anything you want with it. When you lease a car, you must maintain it in excellent condition, and you cannot modify it in any way. You will also be limited in the mileage you can drive per year. Any additional mileage that you drive will cost you extra.
- Must Keep it Top Shape to Avoid Lease-End Costs - While most leases cover normal wear and tear, if you damage the car further, you are liable for those costs. When you bring it back to the dealer, make sure that your car is in pristine condition. If your car has been involved in an accident, ensure that the car is fixed to factory specifications before giving it back to the dealership.
Take the Guesswork out of Purchasing a Mercedes-Benz
If you're interested in getting behind the wheel of a brand-new Mercedes, but can't decide between buying or leasing, then our finance experts will guide you through all of your options. Our team will cater a plan to your unique family needs, financial situation, credit standing, and driving habits. To help you decide which route to take, visit our team at Mercedes-Benz of Milwaukee to learn more about our leasing and purchasing options.
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