Nowadays, there are multiple ways to own a car, and it is up to the buyer to decide whether to lease a vehicle or finance it. In case of leasing a car, one does not have to deal with enormous car loans or worry too much about maintaining it beyond a certain period. On the other hand, while the process of financing a car may be more tedious and expensive, the vehicle is entirely yours, and you do not have to give it back after a period or ensure you don’t drive above a particular number of miles.
What to opt for – leasing or financing?
Let us discuss which is better, leasing or financing a car, in detail.
- How it works
A car lease is a system wherein you get to drive a car for a certain period. Monthly rentals have to be paid against the ownership of the car for a specific duration. The insurance might or might not be taken care of by the leasing company. One also has the option to take ownership of the car by paying an agreed amount. On the other hand, a car loan is an easy way to pay for the complete ownership of the car with the help of equated monthly installments (EMIs) paid over a certain period. The vehicle itself acts as a guarantee in case of a car loan.
- Down payment
In case of leasing a car, you do not have to pay a down payment. However, a down payment has to be made if you’re getting a car financed. This becomes one of the considerable differences and helps one to figure out which is better – leasing or financing a car.
- Company requirements
In case the leasing company requires you to take care of the insurance, if you’re leasing for a longer duration, the terms might not be very customer-friendly. The leasing company will still be the owner of the vehicle, and they will be in a position to dictate the terms of the insurance. However, when you’re financing a car, you can decide to simply insure the vehicle up to a limit of your choice. In this case, financing a car trumps leasing a car.
- Cost factor
Since the ownership of the car is received by you, the monthly installment payable is higher in case you’re willing to get a car financed. Also, a down payment has to be paid, which further increases the cost. However, at the end of the payment cycle, you can choose to sell the car, keep it for further use, or upgrade to another model. On the other hand, in the case of leasing, although the monthly payout is less, you can only use the car as long as you have decided on in the agreement. To decide which is better for you, i.e., leasing or financing a car, you have to understand your specific requirements first.