Car Financing vs. Leasing: What Are the Pros and Cons of Each?
When you get your first vehicle, it can be an exciting time. But before you can take that new vehicle home, it’s important that you ask yourself whether you want to buy or lease. There is a difference between car financing vs. leasing, and each comes with its own pros and cons that one should be aware of. If you’re not sure which is right for you, here’s what you should know about financing and leasing a new car.
Car Financing vs. Leasing? An In-Depth Comparison
Who Leasing Is Best For
If you are looking for the lowest auto rate loans, then leasing might work best for you. Leasing works best for those who can’t make a financial commitment upfront and makes it easier for the vehicle owner to make monthly payments. However, there are mileage restrictions and wear-and-tear charges that come with the leasing option.
How Does Leasing Work
When you lease a car, you’re paying for the right to drive a vehicle for a fixed period of time. An initial amount is paid before driving the vehicle off the lot, usually to cover taxes and certain fees. Then monthly payments are made over a period of time to cover the vehicle’s depreciation.
What Are The Benefits Of Leasing A Vehicle
The benefits of leasing a vehicle over financing include:
- you put less money down.
- there are lower payments.
- it’s easier to keep your monthly spending in check.
- there are manufacturer warranty options.
What Are The Drawbacks Of Leasing A Vehicle
Leasing isn’t perfect; there are some cons associated with the process:
- there are mileage restrictions.
- there are fees for wear and tear.
- after paying everything off, you don’t own the car in the end.
- there are additional costs associated with leasing.
Who Financing Is Best For
Financing works for those who want to be in complete control of their vehicle and finances. There are no mileage restrictions or any additional charges for wear and tear. You can even sell or trade it in at any time.
How Does Financing Work
You obtain and maintain possession of a vehicle if you make a payment to the dealership. You don’t have to go with a new vehicle; you can choose a certified pre-owned vehicle or a used car if you’re looking for something more affordable. Although you own the vehicle, you will have to make monthly payments that might be a bit higher than leasing.
What Are The Benefits Of Financing A Vehicle
Financing a vehicle provides you with specific benefits:
- no wear-and-tear charges.
- no mileage limits.
- you can sell or trade your vehicle at any time.
What Are The Drawbacks Of Financing A Vehicle
That isn’t to say that financing doesn’t come with some disadvantages:
- there are higher monthly payments.
- there are long-term maintenance costs; you have to pay to fix it when something breaks.
- a bigger down payment is required.
Whether you choose to lease or finance your vehicle is entirely dependent on your financial situation and what works best for you. Most people look at their credit score to determine which option works best for them, but if you’re still concerned, don’t be afraid to talk to your local car dealership to see which option would be financially best for you.
