The choice between leasing and financing a car is a very difficult one. For many years, luxury cars were leased, but with the advent of compact cars, mainstream sedans and small SUVs, there are attractive deals available if you want to buy them. So, here are some pointers to decide which is better—leasing or financing a car.
The first point while considering which is better between leasing and financing a car is ownership. In case of leasing, you do not own the car, and you must return it at the end of the term unless you decide to buy it. In case of financing the car, you own the car and keep it if you want it.
The second important point in considering which is better between leasing and financing a car is upfront costs. Generally, leasing includes the first month’s payment, a refundable security deposit, an acquisition fee, a down payment, taxes, and registration. If you are financing the car, costs would include the cash price or a down payment, taxes, registration, and other fees.
Monthly payments should be considered while choosing between leasing and financing too. Leasing payments are always lower than loan payments plus taxes and fees. Since the entire purchase price is paid with other fees the money spent on paying a loan is a lot more compared to that of lease payments.
In the leasing option, if you terminate the lease early, charges can be as costly as sticking with the contract. A dealer may buy the car from a leasing company as a trade-in, letting you off the hook. In the buying option, you can sell or trade in your car at any time. Money from the sale of the car can be used to pay off any loan balance.
You must return the car at lease end, pay any end-of-lease costs, and walk away. In the financing option, you can sell your car when you want a different one.
In leasing, the future value is not affected. In buying, the car’s value depreciates but the cash value, on selling, is yours.
Most leases limit the number of miles you drive and will have to pay charges for exceeding your limits. On the other hand, when you buy the car, you can drive as many miles as you want.
Excessive Wear and Tear
Most leases make you pay extra charges for exceeding what is considered normal wear and tear. When you buy the car, you do not have to worry about wear and tear.
End of Term
At the end of the lease term, you can finance the purchase of the car, while at the end of a loan term, you have no further payments.
Any modification or customization to the car must be removed in case of a lease, but if you purchase it, you can keep the car customized.
So, if you are wondering which is better between leasing and financing a car, the above tips can be indeed useful.