Is It Better to Lease or Finance a Car?
Before you /buy-sell/new-cars|get a new car, one of the most important decisions you have to make is whether it’s better to lease or finance it. Since buying a new car is clearly a very serious and expensive purchase, you have to be very careful and take the pros and cons of each option into account.
Before you get a new car, one of the most important decisions you have to make is whether it’s better to lease or finance it. Since buying a new car is clearly a very serious and expensive purchase, you have to be very careful and take the pros and cons of each option into account. Both leasing and financing have their advantages and disadvantages, and it’s up to customers to decide whether they want to own a car for a longer period of time, but make large down payments and relatively high monthly payments, or lease a new car every three or four years, which comes with significantly lower monthly payments.
Benefits of Leasing
In general, leasing is a more convenient option for those who don’t want to make a hefty down payment, or simply can’t afford it, and want their monthly payments to be as low as possible. There are many no-money-down leases, which means you don’t have to pay anything upfront, and just make the monthly payments, which are usually lower than for buying a car. This is because you are paying for the amount that’s left after the car’s residual value is deducted from its original purchase price. That’s why the lease payments are also lower, as they are made on the amount the car is expected to depreciate while you are leasing it.
Furthermore, with leasing, you get to drive a new car every three years or so, equipped with the latest high-tech features and vehicle safety systems. Also, if you like the car, you can buy it after your lease agreement is over.
Downsides of Leasing
The biggest drawback of leasing is arguably the fact that you don’t actually own the car, as you have to return it at the end of the lease period. This essentially means that you are renting the car, and you don’t have anything to show for all the money you have spent on monthly payments.
Additionally, with leasing, you end up spending more in the long run than you would if you were to buy a car, since you don’t get to sell the car or trade it in at the end of the lease term.
Benefits of Financing
If you want to own your car, then you should consider financing options. After you have paid the loan off, you get to keep the car, and you can sell it afterwards, and use the money to make a down payment on a new car.
Another advantage of financing is that you can drive your car as much as you want without having to worry about mileage limits. If you lease a car, you will have to pay a certain fee if you exceed the limit that the lessor has set, which is usually somewhere around 15,000 miles per year.
Downsides of Financing
The high monthly payments are the biggest drawback of financing. They can be as high as $600 or $700, depending on the car’s sales price and how much money you put down. In any case, the monthly prices for financing are significantly higher than for leasing, and you are also required to make a down payment of at least 10 percent on the car’s purchase price. We have a tool at the top of this page for you to compare rates and see what is available for you.
The Bottom Line
In conclusion, in order to be able to choose the option that’s right for you, you have to take into consideration how much you are willing to pay each month, whether you intend to drive more than 15,000 miles a year, and whether you want to drive a new car every three years, or you are fine with driving the same car for at least 5-6 years.
Visit this page to learn about available financing options and compare the best rates.