If you are looking for a new car you may be wondering whether it is better to lease or finance a vehicle. The truth is, there is no hard and fast rule to help you make the right choice. Instead, you must look at your specific situation and choose the option that best suits your circumstances. To help you make that decision, let’s look at some of the main differences between leasing and car financing:
When you choose to buy a new vehicle, you own it and can keep it for as long as you like. Even if you need to finance the vehicle, once you have settled your loan, you will have complete ownership. When you lease a vehicle, you must return it at the end of your lease which normally lasts for 2 or 3 years. However, you may make arrangements to purchase the vehicle after your lease has ended.
When you finance a vehicle, your monthly payments are almost always higher than the monthly payments for a lease. This is because you are paying off the entire purchase price of the vehicle, plus taxes, interest, other charges and fees. On the other hand, in a lease agreement, you are paying for the depreciation of the vehicle during the lease term, in addition to interest charges, taxes and other fees.
Changing your vehicle
If at any time you decide you no longer want the vehicle you have purchased, you may sell it and use the money from the sale to pay off your loan balance. If you want to terminate your lease early, it could end up costing you as much as it would have had you stuck to it. This is due to the penalty fees you may be charged for ending your lease before its full term.
Although your vehicle’s mileage can affect its value if you choose to sell it or trade it in, you are free to drive your vehicle as much you want, once you have purchased it. With a lease, there are restrictions on the mileage you can put on the vehicle each year. If you surpass that limit, you will be charged a fee.
Excessive wear and tear
You will face penalties if a vehicle has excessive wear and tear at the end of your lease. When you buy a vehicle, you will not have that concern. Wear and tear will, however, affect the value of your vehicle should you decide to sell it.
End of term
Once your car financing term has ended, you will no longer have any financial obligations to the car finance company. You’ll have equity in the vehicle which you can put towards the purchase of your next car. In a lease agreement, no matter how much you pay, you will not have any equity in the vehicle.
If you want your vehicle to stand out, you can go ahead and do whatever customization you choose when you have purchased the car. At the end of a lease term, you must return the car the way you received it. That means you will not be able to customize it the way you want unless the customizations can be removed without causing damage to the vehicle.
Are You Looking to Lease or Finance a Car?
If you decide that car financing is the right option for you, Credit Now can help. Regardless of your credit score or financial situation, we can work with you to get the vehicle you want. So, contact us today.