Leasing vs Financing: Know Your OptionsMar 22nd, 2016
So, you’ve made it through the large decision that is picking your next (or first) car. Whew. Now, all of the sudden, you find yourself facing an equally large decision – picking between financing or leasing your new car. While the two share at least some degree of similarity, the differences between the two are much more vast, making each more suitable to a different type of person. If you’re on the fence as to whether you plan on leasing or financing your car, the below information could be exactly what you need to come back down. How are the two different from one another?
A Better Question: How Are the Two Similar?
A simple question with an even simpler answer. Whether you lease or finance a car, you’ll be making payments over an agreed-upon period of time. The monthly or bi-weekly payments typically stay consistent throughout the entirety of the contract and everything should run smoothly upon making regular, full payments. Outside of either option revolving around the use of contracts and regular payments, the two are very different.
When you lease a car, you’re paying zero interest and are usually able to get a better bargain than you might with financing. As such, the cost one incurs specifically over the time period that their lease or financing takes place will often be lower. This can either translate to a higher degree of savings on your vehicle or even the ability to get a more expensive vehicle than you could afford if you were to go the financing route. Of coarse, this doesn’t necessarily go to suggest that one who only leases their cars will spend less on their vehicle over the course of their lifetime than one who only finances their cars. In the short term; however, saving money on payments through leasing is nearly a given.
The fact of the matter is that, when leasing a car, you do not actually own the car. You’re essentially renting it from the dealer as opposed to buying it outright. As such, it’s not exactly in the dealership’s best interest for those leasing cars to be taking a cross-country road trip every week. Typically, agreed-upon kilometer restrictions will be put on leased cars for the leaser to adhere to.
While you won’t actually be forbidden from reaching and surpassing the kilometer limit in question, doing so will typically incur added costs when the time comes for the lease to be up. Although those merely using their car to get to and from work every day will likely not have any issue due to such restrictions, someone traveling the world may want to consider financing their car instead, as it may prove to be less costly in the long run.
Length of Your Contract
Even if you do choose to finance your vehicle, when it comes to the length of your contract, there isn’t any sort of time period written in stone to which all financing contracts must adhere. Depending on the situation, the length of your contract can vary greatly. It should b noted; however, that longer contracts are not at all unheard of in the world of financing. By choosing to finance your car, you may very well find yourself locked in the contract for a significant amount of time. Of coarse, this can vary from contract to contract.
How Long Do You Plan On Keeping Your Car?
This plays a huge (possibly the biggest) role in whether or not one option is better than the other. If you plan on keeping your car for years and years, riding it out until it can drive no more, only financing will give you what you want. When you lease a car, the car is given back to the dealership after a certain amount of time has passed. More or less, the apartment is to the house what the lease is to financing.
Depending on the situation and how one treats their car, financing, while initially the more expensive of the two options, can prove to save a large amount of money, making it the superior of the two. Whether you plan on treating your car well to save money or would simply like the idea of truly owning your vehicle, financing a car offers something that leasing one just can’t.
Whether you lease or finance your new vehicle, you’ll find either option to come with its own list of pros and cons, as well as the type of person it most caters to. Would you like to own your car? Are you looking for a large amount of initial savings? How many kilometers do you plan on putting on the car? These are all questions which only you can answer, though are important questions nonetheless.