Either you lease or finance a car really depends on you. What do you need? What factors are important to you?
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Lease VS Finance a Car
We provide you with some information about financing and leasing a car, hoping to shed some light on the subject for you and help you make a good decision.
What does lease mean, and how does it work?
Leasing a car means you make payments in return if using a car for a short-fixed term (usually 2-4 years), and you return the vehicle when the lease is up.
It’s like renting a car; the car doesn’t belong to you, and you only pay for the car’s value that you use. Leasing typically lowers monthly payments.
What does finance a car mean, and how does it work?
Financing a car means loaning a car from a lender. You come to an agreement to make payments over a certain period in return for using the vehicle.
Dealerships are usually in touch with a lot of lenders. Once you’re set with an agreement, it’s your responsibility to make monthly payments on time.
It is a great way to rebuild your credit, and it is adjusted to your financial situation. Another great point about financing is you agreed with the lender that the vehicle is yours at the end of the period.
What is the main difference between leasing and financing a vehicle?
The primary and obvious difference between leasing and financing is ownership. When you lease a car, you have to return it at the end of the fixed time, but the vehicle will be yours when financing a car at the end of the agreed term.
As you pay each month for a car you have financed, you get one step closer to owning a car. Finance payments are higher than lease payments.
One thing you should know before leasing a car is that it comes with an annual kilometer restriction, wear & tear charges, and early termination stipulations.
The most reliable car insurance companies
A complete comparison of leas and finance a vehicle
Financing a car includes taxes and fees stretched out for you in a fixed amount of time, typically 6-7 years. The shorter the term, the more you have to pay monthly, and the longer the period you have to pay less.
On the other hand, leasing a car is easier to afford because the monthly payments are less than financing it, and you only pay as much as you use the vehicle, which means whatever is left is the total value of the car for selling.
When the agreed time is over, you can either buy-out the vehicle or return it. There is a third option too, you can renew it, continue your payments and lease the car again. Statistics show most people in Canada return the vehicle and get a new car and a new lease.
Leasing is mainly for people who like to change their car every once in a while, and are not interested in owning one. For people who want to own a car financing, one is a good option because, at the end of the payment, the car will be theirs, but when leasing a vehicle, you’re just stuck with payments after fees, and you don’t own a car.
Yes, leasing a vehicle is financially convenient; however, the cost of leasing several cars eventually becomes higher than then financing one.
When you finance a vehicle, you can use your vehicle as often as you want regardless of the mileage; you can add safety features and customize your car.
Leasing companies know some wear-and-tear is bound to happen, and it doesn’t matter if it’s minor or significant. The expense will come straight out of the borrower’s pocket.
We suggest you search about leasing a vehicle thoroughly, ask people who know about renting a car or has experienced it, or get in touch with some professionals and ask their opinion.
There is one advantage to both leasing a car and financing one share, and that is that none of them impact your insurance costs.
Which one is better for you?
The only person who can know that is you. For better understanding, we listed some essential factors that you can compare to your situation.
Want to lease a vehicle then; You Have:
- An average number of miles. For example, you only use it for going to work and back.
- A stable and predictable lifestyle.
- No problem maintaining the car.
You Want:
- Lower monthly payments.
- Change your car every once in a while. (Different models, different years, etc.)
- Latest safety features & warranty.
You Don’t Mind:
- Trading in or selling a used car privately.
- A never end monthly payment, however small.
Want to finance a car, then; You Have:
- Drive as often as you like.
- Lifestyle changes.
You want:
- Own a car.
- Build up trade-in or resale value.
- Drive a car for a long time.
- After paying off the loan, feeling free.
- Customization.
You don’t mind:
- Higher monthly payments.
- Repair costs after your warranty expire.
Have bad credit?
Having bad credit puts you in a tight spot doesn’t matter whether you choose to lease or finance a car, but the good news is that getting a finance vehicle is more manageable and better with bad credit.
Introduction of car insurance rules and conditions
Now you may wonder how financing a car is better than getting a personal loan?
Sample if you loan a car and aren’t able to pay the agreed fee, the loaner can take the car back as collateral and sell it to recover all or some of the money it costs the loaner, which means avoiding a chunk of money loss. Although, having a bad credit score may they get you a higher monthly payment.
But with leasing a vehicle, it’s not like that. When you lease a car, you don’t own the car; the dealership does. And if you have to break your agreement, you’re left with debts because the vehicle doesn’t worth nearly as much as it did when you started leasing it. So don’t be fooled by lower monthly payments.
Things you should know before purchasing a previously leased car
An “off-leased vehicle” means that someone previously released the vehicle and has been returned to the dealership. If you rent the car, and you are deciding to buy it, you should know these two advantages that leased car has:
- They require fewer repairs and maintenance.
- Has been driven less than you would think.
These advantages are due to the leasing rules agreed between the owner and borrower to keep the car in good condition.
Another advantage that must be mentioned is the warranty. Dealerships offer all kinds of extended warranties for a previously leased car; however, the vehicles are probably still under cover of their own original security because of the short length of most lease terms.
None of these means that you should buy the first off-lease car you come across. Off-lease vehicles may have some issues, and you have to be wise. Request an inspection, perform a test drive, do some research, get a carfax history report to help you make the right decision.
