If you are shopping for a new car, you have to decide whether you want to buy or lease. The first step is to figure out whether you are buying a new or used vehicle.
Lease or Finance – What’s the Difference?
Both leasing and financing a car will give you access to a vehicle and provide the ability to use it in return for a monthly payment. Leasing a car means paying to use a vehicle for a longer period of time but its ownership will remain in the hands of the lessor. Financing, on the other hand, is the process of paying monthly fees to pay off the vehicle, leading to total ownership of the car after it is paid off.
What You Should Know: Leasing a Car
Leasing, the equivalent of renting a car, has its perks and may be a great solution for individuals who are looking for the privilege of using a car without purchasing one. This option usually involves a small monthly payment and will most likely be more comfortable for the wallet. Even if the selected car is newer and of higher quality, the monthly fee for leasing would be significantly lower than that of financing the vehicle. The overall costs involved with driving a leased car are minimized. Repair costs are often covered by a factory warranty that comes with the rented vehicle and tax associated with the sale is much lower.
There are a few downsides of leasing a vehicle such as not having ownership of the car. This negative could, however, be seen as a plus by enthusiasts looking to drive a different car every year. Another setback is that, if you decide that the vehicle is no longer suitable for your needs, it may be difficult and expensive to cancel your contract. Furthermore, contracts often include a mileage limit that you cannot exceed while leasing a car. It is advisable to calculate whether investing the required sum to lease a car is viable or financing the vehicle would be more beneficial.
What You Should Know: Financing a Car
Similarly, financing a car may not be for everyone but is a great option for individuals looking for more security and flexibility. The main advantage of financing is ultimate ownership of the car after the payments have been made, making your investment worthy. Possessing the vehicle gives additional benefits of increased flexibility and no limit on how many miles the car has reached. Additionally, you have the freedom to sell the car or use it as a trade-in.
However, the path of financing a car is a more expensive one as monthly and down payments will be higher, the owner holds the full responsibility for any vehicle repairs necessary beyond warranty service and most people can only afford to buy one car before saving for a second one.
Although leasing a car is tempting with its smaller investments and the ability to change cars in smaller periods of time, financing will also provide valuable benefits such as full ownership and control over the vehicle.