If you are in the market to buy a new car, you don’t have to pay the amount entirely in cash out of pocket. Depending on your personal choice, you can always finance the car or get it leased. Both these payment methods come with their own set of benefits and challenges. So, if you are wondering how to decide between leasing and financing a car, take a look at the points listed below.
- Vehicle ownership: This is the major difference between leasing and financing, and can act as a deciding factor between the two. When you lease a vehicle, you do not own it and you have to return it as per the fixed period of time. On the other hand, when you wish to finance a car, you make payments at regular intervals until it becomes completely yours to keep.
- Freedom to customize: Trying to understand how to decide between leasing and financing a car? Keep this point in mind. In case of lease, you will have to remove any or all the modifications before giving it back, once the period is over. Also, you will have to pay for the damage and permanent alterations. With the option of financing, you get the complete freedom to customize your car.
- Difference in cost: Lease payments are undoubtedly lower than the loan payments as you have to only pay for the depreciation value during the leasing period, rent charges, fees, taxes, and interest. In contrast to this, financing costs you higher than leasing as you pay for the entire value of the car.
- Warranty protection: Are you still confused about how to decide between leasing and financing a car? You must consider the factor of warranty. Warranty protection is generally better with leasing than financing. Most of the car manufacturers offer warranty protection for the first three years of the car, which matches the leasing period. However, as the cars get old, they require a costly maintenance in order to remain in a pristine condition.
- Long-term intention: While choosing between leasing and financing, it is necessary to remember your long-term plans. If you are someone who likes to constantly buy a new car, then you must consider the option of leasing. But if you wish to use a car until it dies, then financing is definitely the reliable choice.
- Early termination: You have to compare various factors and one of them is early termination. If you want to end your lease before the termination period, you will have to pay a termination fee, which is almost equal to the amount of the rest of the lease. In the case of financing, you can sell your car whenever you wish to and the money you make by selling it can be used to pay off the loan.