Before you get yourself a shiny new car, let’s take a look at the different options you have. There are two ways through which you can get yourself a car. One is ‘car financing’ and the other is ‘leasing’. Read on to find out more about financing vs. leasing a vehicle.
1. Car financing
Paying the full amount for your car can be difficult. So the best option here is to get a car loan or car finance. How this works is you take a personal loan from a financial institution (say a bank) or the car dealership to purchase your vehicle. This loan is paid back to the lender in fixed monthly payments (plus interest) until the entire amount borrowed is paid back. After which you are the sole owner of the car.
So how do you successfully get financing for your car? There are two things you can do to ensure that your car loan is approved.
2. Car lease
Leasing a car is like renting a car. You sign a lease contract with the dealer for the car for a fixed time and you pay monthly installments for that fixed time. These monthly installments are much lower than the installments you would pay when you get a car loan. Also, there’s no down payment involved. The monthly installments include maintenance, insurance, taxes, and some other recurring expenses. With a car lease, you don’t have to worry about selling your car and actually get a new car with a new lease every few months. Which also means that you never own the car.
Leasing a car may seem convenient, but in the long run, this might seem an expensive option. If you take the car on lease for several years, you might eventually end up paying more than what it’s worth through monthly payments.
So when it comes to financing vs. leasing a vehicle, which one is for you? There are certain things you need to consider before you make this decision.
Monthly installments for a car loan is much higher than a car lease.
Think about how often and how long you want the car? If you’re going to frequently use the car, then the usual ‘wear and tear’ is obvious. And if you want a car for several years then a car lease isn’t a good idea.
For financing vs. leasing a vehicle, both options depend on your lifestyle. Consider both these options before you make the decision.