Leasing Vs. Financing A Car: Which Is Best For You?
Key Takeaways:
- Leasing a car may be a better option if you don't plan to own the car for more than a few years.
- Financing a car may be a better option if you plan to own the car or if you want to customize your car.
- Leasing a car generally has lower monthly payments than financing a car.
- Financing a car generally means you are not restricted in terms of mileage or if you want to make modifications to your vehicle.
Owning or buying an automobile is a dream come true for most people, but it also comes with a high price tag. If you want to borrow money to purchase your next vehicle, you have a few alternatives to think about. The two major options are leasing or auto financing. Before you choose a car buying option, you should consider many factors, including your budget, tastes and lifestyle, financial commitments, and duties.
To help you decide on the best option for you, John Lee Mazda will compare leasing vs. financing a car in this post.
Leasing:
Leasing a car is similar to monthly automobile rentals. You agree to buy the automobile outright or return it at the end of the term and start the process again with a new one. You pay monthly payments for the car.
Financing:
You may finance your vehicle through a lending institution such as a bank or credit union. You make monthly payments on the car for as long as the loan is ongoing and due. Once complete, you have full ownership of the vehicle.
Have you considered the benefits of buying a certified pre-owned car?
Leasing vs. Financing:
The process:
Leasing:
Finding a brand-new car that meets your needs at the dealership of your choice is the first step in leasing a car. Next, the various leasing conditions will be explained to you. These options include mileage restrictions, duration (or length of lease), payments, and any additional fees, charges, or down payments necessary. You will need to submit and get the dealership's approval on a credit application. A lease agreement will then be signed between you and the dealer.
Financing:
You must apply for and receive approval for an auto loan through your bank or the dealership to finance a vehicle. You may begin by being pre-approved through your financial institution or by going to the dealership you've decided to work with and looking around for new and used cars.
You might need to put money down on the car, whether leasing it or financing it. It's crucial to tell your insurance company of your lease or financing purchase immediately. The car must also be fully insured. Most financing institutions or leasing firms want evidence of insurance within a specified time after you receive your car.
Payments:
Leasing:
Compared to financing, leasing often has lower monthly expenses. Leasing an automobile allows you to pay for the portion of the car's worth that you use while driving it. The term "depreciation" refers to a vehicle's decline in value. You pay for depreciation when you lease a car.
Financing:
When you finance a car, your regular payments go toward paying off the lender. The principle and interest will both be included in your payment. That is why financing a car means higher monthly payments. The car is yours to keep after your auto loan is fully repaid!
Customization:
Leasing:
Leased vehicles must be returned to the dealer at the end of the lease term in good condition, per the contract's mileage and wear-and-tear allowances. Lease contracts typically do not allow for modifications to be made to the vehicle.
Financing:
If you finance a car, it is yours to do as you please. You may modify, sell, or trade it in as you wish. Any modifications to the vehicle may increase its worth when it is traded in or sold again.
End of term:
Leasing:
The financial entity that holds the lease and the dealership will notify you when your lease term is about to expire. You can buy the vehicle, give it back, or lease a new one. A vehicle inspection will be conducted if you return your leased car to determine whether any extra fees need to be paid.
Financing:
While leased automobiles sometimes come with a guarantee, you are responsible for costly repairs because financed autos are owned. When a financed car is fully repaid, you become the owner and receive the title. Any earnings or profits you make when you sell the car are yours.
Mileage restrictions:
Leasing:
You may pick from a range of mileage options with leasing to match your driving demands. However, unless you buy the car before the lease, you are responsible for any mile overage fees if you go over your allotted distance.
Financing:
You can drive as many miles as you like with car financing, but keep in mind that doing so will reduce the car's trade-in or resale value.
Wear and tear:
Leasing:
Leases have wear and tear standards that you are held accountable for if exceeded when you turn in the car. Always read your lease agreement thoroughly, so there are no surprises.
Financing:
With an owned car, you can drive as much as you want and don't have to worry about returning it in pristine condition. Of course, if you do damage the car, it will lower its resale value.
Upkeep and maintenance:
Leasing:
With a car lease, the dealership is usually responsible for general maintenance and upkeep. You typically won't have to worry about major repairs as long as you maintain the car according to the terms of your lease agreement.
Financing:
You are responsible for all repairs and maintenance if you finance a car. This can be expensive, but you have the option of trading in or selling the car when it's time for a new one.
Leasing vs. financing a vehicle is a personal decision that depends on your driving habits, budget, and needs. Consider all your options before deciding to ensure you get the best deal for yourself.
John Lee Mazda serving Panama City, FL, can help! Our finance experts consider every customer's situation individually and develop a plan that best meets your needs. We strive to make buying your new car as simple as possible because we believe everyone should have the chance to drive away from our dealership in a new Mazda.
