When it’s time to purchase a new car, it’s a big decision. There are a lot of things to consider, such as buying new or used, how much to save for a down payment, and what type of financing you’d like for your vehicle. It’s important to always weigh your options and carefully plan when you buy a car.
For some, they are able to save and make their vehicle purchase outright, without financing. For most people, however, they’ll need to decide if they’d like to finance or lease their new vehicle. But what are the benefits of one over the other? In this article, we’ll discuss the difference between financing and leasing your car, and the pros and cons that you can expect from them both.
When you opt to finance your new car, you’re making a commitment to purchase it. In order to do so, you’ll be borrowing money from a bank or financial institution so that you can make your purchase from the car dealership or private seller. Financing a car means you’ll be taking on substantial debt, and you’ll have to make monthly payments towards that debt with the added APR charges tacked on.
Vehicle leasing is the most popular option outside of financing. When you decide to lease a vehicle, you’ll typically deal directly through the dealership instead of a financial institution. You’ll make monthly payments towards the car you’re driving, just like when you finance, however at the end of the lease (typically 2-4 years) you’ll turn in the vehicle back to the dealership. This process can be compared to that of a long-term rental. There are some lease arrangements, however, that will allow you to convert the vehicle to a purchase at the end of the agreement.
Purchasing a vehicle is a large financial commitment, which makes weighing the pros and cons of this method important before you make your final decision. Take a look at these points:
Leasing a vehicle may be the right decision for you financially; However, it’s important to weigh the pros and cons, just as with financing, before you go this route. Here are some things to consider:
Pros: