If you’re in the market for a new set of wheels, you might be wondering about the difference between lease and finance and which option might be best for you. The answer is that it depends on your unique set of circumstances and your end goal. To help you figure everything out, let’s start by defining the difference.
What Does Financing a Car Mean?
Financing a car means getting a loan from a financial institution to buy a car. So how do car loans work? Well, you’ll make payments to the lender over a set period. The costs will include the amount of money you borrowed, interest, and fees. In the end, you own the car.
What Does Leasing a Car Mean?
Leasing a car simply means that you are renting it. You are paying for the ability to use the vehicle rather than buying it. During your lease, you’ll pay the cost of the rent, as well as taxes and fees. When the lease is up, you’ll be required to return the vehicle in good condition.
Pros and Cons of Leasing
Like with almost anything, both options have pros and cons. But one is probably better suited for your needs than the other. The benefits of leasing a car can be:
- Lower monthly payments
- Lower upfront out-of-pocket cost
- Generally covered by a warranty
- No sales tax to worry about
- No concerns about depreciation
Of course, one of the most significant downsides to leasing a car is that you won’t own it even after all the money you’ve put into it. Lease contracts can also be complicated, which makes it hard to shop for the best deal. Here are some of the other cons of leasing to consider:
- Potentially higher insurance premiums
- Nickle and dimed for excessive wear and tear
- Fees and penalties for putting too many miles on the car
- Fees for terminating the lease early
- You’ll end up with no trade-in
Pros and Cons of Financing
The ultimate benefit to financing is that the car will be your property once the loan is paid in full. Some of the other benefits of financing are:
- No limits on your mileage
- Lower insurance costs
- The right to sell the car whenever you want
- Freedom to make modifications or customize the vehicle
The downside to financing could be a higher monthly payment, but this isn’t always the case. Some other cons to consider:
- More upfront costs (sales tax and down payment)
- Depreciation of the vehicle
- Maintenance costs once the warranty is up
Should I Lease or Finance?
The decision depends on what you need and what is most important to you. If you like driving something new every few years, don’t need to go on long-haul road trips a lot, or don’t have a lot of money upfront, leasing might be the right option. Some leases also allow you to have the opportunity to buy the car when the lease ends too.
If you prefer a long-term option, you will want to buy. Financing and owning a vehicle is also the right choice if you must put on many miles or want to make customizations to your car, truck, or SUV. You won’t be able to do those things with a leased vehicle. Leases limit the miles you are allowed to drive each year, and if you go over, there are fees you must agree to pay per mile. That can get pretty expensive if you aren’t careful.
The consensus is that it generally makes more financial sense to go for ownership rather than a rental. But the choice is yours. Depending on your wants, needs, and circumstances, one might be a better path than the other.
If you need help concerning any aspect of the buying or financing process, contact us today. We’re happy to help you by email, phone, or in person.
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