Did you know that 1.6 million new cars were registered in Canada last year alone?
You’re looking for a new vehicle, but you’re not sure if leasing or financing is the best option for you. Both leasing and financing have their pros and cons, so it can be hard to decide which is right for you.
Keep reading to explore the differences between leasing vs financing when deciding which is right for you. We’ll help you figure out which option will save you money in the long run.
What Is Leasing a Vehicle?
In short, car leasing means that you are paying to use the car for a set period, typically two to four years. You will make monthly payments, and when the lease ends, you will give the vehicle back to the dealership. There are a few drawbacks to leasing – first, you will have to pay fees and may be responsible for damage beyond normal wear and tear.
Second, you will likely be restricted in how many miles you can drive each year. Finally, leased vehicles must be returned in good condition – meaning that if you want to modify the car in any way, you may have to pay extra at the end of the lease.
What Is Financing a Vehicle?
When you finance a vehicle, you are taking out a loan to pay for the car in full. You will make monthly payments on the loan, and once it is paid off the car will be yours. The main benefit of financing is that you own the vehicle outright – meaning you can do whatever you want with it, including modifying it, selling it, or keeping it for as long as you like.
Benefits of Leasing a Vehicle
Now that you know the basics of leasing vs financing, let’s explore some of the benefits of each option. They include:
1. Lower Monthly Payments
One of the main advantages of leasing a vehicle is that it can result in lower monthly payments than financing a car. This is because you are only paying for the depreciation that occurs during the time you have the car. This can be a great option for people who want to drive a new car every few years but don’t want the higher monthly payments that come with financing.
Another advantage of leasing is that it can offer more flexibility in terms of mileage and length of the term. So, if you only need a car for a short period or don’t drive a lot, leasing can be a great option.
2. Easy to Get Out Of
One of the best things about leasing a car is that it’s easy to get out of if you find that it’s not the right fit for you. At the end of the lease term, you can simply return the car to the dealership and be done with it. You don’t have to go through the hassle of finding a buyer or trying to sell it yourself, and you don’t have to worry about negotiating a pay-off amount with the lender.
Leasing is a great option for people who like to change cars frequently or who are unsure about what type of car they want. It’s also a good option if you’re on a tight budget and can’t afford to buy a car outright. If you decide later that you want to own the car, you can usually arrange to purchase it at the end of the lease term.
3. No Need to Worry About Repairs
When you lease a car, you can drive it for a set period – typically two to four years. When the lease has ended, you have the opportunity to purchase the car, swap it in for a new lease, or simply give it back to the car to the dealership. One advantage of leasing is that you don’t have to worry about unexpected repairs.
Since the dealership is technically the owner of the car, they are responsible for covering the cost of any repairs. This can save you a significant amount of money over the life of the lease.
In addition, since you are only driving the car for a few years, there is a good chance that any major repairs will be covered by the warranty. As a result, leasing can be a great option for people who want to avoid unexpected repair bills.
Benefits of Financing a Vehicle
There are also benefits to financing a vehicle, which include:
1. Building Equity
As anyone who has ever taken out a loan knows, making monthly payments is key to building equity and building your credit score. With each payment, you are chipping away at the total amount you owe, and slowly but surely gaining ownership of the asset. This is true for everything from houses to cars, and it can be a helpful way to build wealth over time.
2. No Mileage Restrictions
One of the benefits of financing a vehicle is that there are no mileage restrictions like there are with leases. This means you can drive as much or as little as you want without worrying about additional fees. If you only use your car for short trips around town, you won’t have to worry about going over the mileage limit.
And if you take long road trips or move to a new city, you can do so without having to pay extra. This freedom can be especially helpful if your job requires you to travel frequently.
3. Lower Interest Rates
In today’s economy, it’s more important than ever to save money wherever you can. One way to do this is to get a lower interest rate on your auto loan. In general, interest rates on auto loans are lower than the rates charged for leases. This means you can save money on financing a vehicle if you compare rates and terms from different lenders.
Making the Decision: Leasing vs Financing
The bottom line when choosing between leasing vs financing is to educate yourself before approaching a car loan provider regarding your credit score and what you can be approved for. It’s much more important to consider all of your car financing solutions before jumping the gun on a car loan.
An educated consumer is a smart buyer. When you’re finished comparing the differences between financing a car and leasing a car, and you are ready to talk to a car loan provider, you should know all of the ins and outs of that loan, vehicle, and provider.