Key Takeaways:
- There are pros & cons to both car leasing and financing.
- Car leasing means you’re only paying for the depreciation of the vehicle over the term of the lease,
- While with the financing, you’re paying off the entire purchase price of the vehicle.
- Ultimately, the best option depends on your budget and needs.
When buying a car, one of the big decisions you’ll have to make is how to pay for it. Should you lease your car or finance it? Both options have pros and cons, so which is better depends on your circumstances. In this article, Feldman CDJR of Clarkston will break down the pros and cons of each option so you can settle on which is best for you. Keep in mind that this is just a general overview – for more specific advice, talk to an auto financing specialist.
Also, If you’re trying to figure out whether you should buy a Certified Pre-owned car from a dealership or not – Here’s our take on it!
Car Leasing: All You Need To Know
Alright, without further ado, let’s start with car leasing. Car leases are becoming increasingly popular, especially among young and first-time car buyers. If you’re thinking about leasing a car, here are a few things you need to know:
What Is A Car Lease?
A car lease is nothing but a long-term rental agreement. You make monthly payments to the dealership for the use of the vehicle, but you don’t actually own it. After the lease period, usually two or three years, you simply return the car to the dealership and start anew with a new vehicle.
What Are The Benefits Of Leasing An Automobile?
There’re several benefits to leasing a car rather than financing it. For one thing, leases typically have lower monthly payments than a traditional car loan. This is because you exclusively pay for the vehicle’s depreciation during the lease term rather than the entire purchase price.
Another benefit of leasing is that it offers more flexibility than buying. If you only need a ride for a few years or are unsure what kind of car you want, leasing can be a great option.
It’s also easier to get out of a lease than a car loan; if your circumstances change & you can no longer afford the monthly payments, you can simply return the car to the dealership.
What Are The Drawbacks Of Leasing A Ride?
There are some drawbacks to leasing as well. First, you’ll never own the car outright; at the end of the lease term, you’ll have to return it to the dealership.
Second, there are mileage restrictions; most leases limit you to 10,000 and 15,000 miles per year. You’ll have to give out a fee for each additional mile if you go over this limit.
Finally, leasing can be more expensive in the long run than buying a car outright. If you’re planning on keeping your car for more than a few years, or if you drive a lot of miles, buying may be the better option.
Car Financing: All You Need To Know
Well, the second option is to finance the car. Car financing has been in trend for quite a while and is chosen by most car buyers.
What Is Car Financing?
Alright, so what exactly is car financing? In simple terms, when you finance a car, you’re borrowing money from a bank or financial institution to pay for the vehicle. You then push monthly payments to repay the loan, plus interest.
What Are The Benefits Of Car Financing?
There are a few key benefits of car financing. First, it allows you to buy a more expensive car than you could if you were paying cash. You can buy a car outside your budget and spread the cost over a few years.
Another benefit of financing is that it can help improve your credit score. When you make timely monthly payments, it shows potential lenders that you’re a responsible borrower. This can be much more convenient if you ever need a loan for a major purchase, like a house.
Third, you might be able to snag up a lower interest rate on a car loan than you could get with a loan for personal needs. This is because car loans are considered secured loans, which means the car serves as collateral.
What Are The Disadvantages Of Car Financing?
There are a few disadvantages of car financing to keep in mind. First, you’ll have to pay interest on the loan, which will increase the overall cost of the car. For example, if you finance a $20,000 car at 5% interest for five years, you’ll pay a total of $21,600.
Second, the lender can repossess your car if you miss any payments or default on the loan. You don’t have to worry about this major risk with leasing.
Finally, once you pay off the loan, the car will be yours, and you’ll be responsible for all repairs and maintenance. With leasing, you can simply turn in the keys and walk away at the end of the lease term.
Car Leasing Vs. Financing: The Main Difference
So, to sum it up, the striking difference between car leasing and financing is that with a car lease, you’re only paying for the use of the car during the lease term, while with a loan, you’re paying off the entire purchase price of the car.
If you’re unsure which option is perfect for you, talk to your financial advisor or a car leasing expert. They’ll help you weigh all the factors and make the best decision for your unique situation.
Car Leasing Vs. Financing: Which Is Better for Me?
The answer to this question comes down to your individual circumstances. Both options have pros and cons that you’ll need to consider before deciding. But you can determine the best course of action by asking yourself a few key questions:
- What is my budget?
- Do I want to own the automobile outright?
- How long do I plan to keep the car?
- What is my credit score?
Based on your answers, financing may be the better option if you have a higher budget and are planning to keep the car for longer. Owning the car outright also gives you more freedom to modify it as you please. If you have a lower budget or are looking for a shorter-term solution, leasing could be the way to go. And if your credit score isn’t perfect, you may have an easier time getting approved for a lease than a loan.
At the end of the day, there’s no right or wrong answer when it comes to leasing vs. financing a car. It all depends on your personal needs & circumstances.
Here’s How Feldman CDJR of Clarkston Can Help!
If you’re still unsure whether you should go for a car lease or auto finance – our team of experts at Feldman CDJR of Clarkston, serving Waterford, MI, can help. We’ll work with you to figure out what type of vehicle you need and help you find the perfect lease or loan option.
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