On a lease, you finance only a portion of the price of the vehicle, and pay that for a set amount of time (typically 24-36 months). For example: Vehicle A costs $25,000. At the end of a 36 month lease, it is worth $15,000, or 60% of it's original value. This is known as the residual value. Put the residual to the side, and forget about it for now. You will finance the remaining $10,000 over the 36 month lease.
There are limitations to a lease, such as miles. These are set up front, and are designed to ensure that the value is what was quoted at the time of purchase.
At the end of the lease, you have numerous options.
1. Turn in the vehicle, and walk away.
2. Turn in the vehicle, and lease another.
3. If you have low miles, trade it in, and use the equity towards another lease or purchase.
4. Finance the residual value, and keep the car.
A lease is good for someone who purchases a vehicle every few years. Rather than accrue thousands in negative equity, you start fresh every time. Your car will always be under warranty, so repair costs are minimal. Understand that it takes MUCH better credit/credit history to lease a car. If you don't have a credit score of over 700, at least 5 years of credit history, and good auto credit, it's not going to happen.
On a purchase, you come to terms on a price, and finance the vehicle for a set amount of time (typically 60-72 months). At the end of the finance term, the vehicle is paid off in full. The lien-holder will then send the title to you, and you legally own the vehicle.
A purchase is good for someone who will keep their car after it's paid off. Once the car is paid off, all you need to pay is maintenance and upkeep. You can drive as much as you like. There are no limitations on mileage, upgrades, etc. It's your car, and you can do as you please.
A cash deal is very simple. Negotiate the price of the vehicle, pay for it, and receive the title.
18 years retail auto sales experience.