In addition to the housing costs, buying a used or a new vehicle is another significant expense that the families and the individuals incur when they wish to settle down. Those of you who do not wish to bear the high interest rates of a car loan, or find it a daunting task to save a lot of money to buy a car, how about considering the option of a lease?
Financing vs. leasing a vehicle
For Americans, a vehicle, be it financed or leased, is considered to be a major expenditure. Though in the short run, leases might seem cheaper, on the whole, buying a vehicle happens to be a fairly cost-effective alternative. However, understanding the pros and cons of financing vs. leasing a vehicle will certainly help you make a more informed decision about what is ideal for you as well as your family.
Leasing a vehicle
When you lease an automobile, the bare bones of the agreement is that one party allows the other party to use a particular vehicle or car for a stipulated amount period, and in exchange, periodic payments are to be made. If there’s no option in your contract to purchase the vehicle at the expiry of the term, you’ll have to return it to the owner.
- The lease payment that you give out every month would be lesser than your monthly payout when you finance the car, even if it is the same vehicle involved.
- The leased vehicle will be under warranty throughout the leasing period, so there’ll be barely any repair or maintenance expense; you’ll not need to shell out anything if any mechanical failure occurs.
- The option to lease a far more expensive vehicle than what you could otherwise have afforded.
- The lease expires in two to four years after which you can a new vehicle.
- You need a predictable and stable income to get a vehicle on lease.
- You are permitted a fixed mileage limit; if you exceed this, you’ll have to pay an extra fee per mile.
- You end up paying a higher cost of the lease as compared to what you would have paid when financing a vehicle over a period.
Buying/financing a vehicle
If you wish to purchase a vehicle through car finance, you’ll have to bear a fixed monthly cost, and once the loan tenure concludes, you become the owner.
- You become the rightful owner of the car after you make all the payments.
- You can customize and personalize your car, as and how you like it.
- You need to pay no additional charges after the end of the loan term.
- You can drive it for as many miles as you want to.
- Your monthly payout is usually higher when you finance a car.
- You’ll have to bear the entire repair and maintenance cost when the warranty expires.
It is crucial to keep in mind all these pros and cons of financing vs. leasing a vehicle. Hopefully, now you can make a more informed choice.