Leasing vs. Financing a Vehicle: Which is Right for You?
Whether it’s your first car or you’ve been doing the rounds at dealerships for longer than you can remember, purchasing a vehicle will always be one of the most significant financial decisions you can make. And although it would be nice if it were always as simple as plunking down the exact amount of cash a car costs and driving on your merry way, often times this is not a viable method for vehicle shoppers.
That’s where the choice of leasing vs. financing comes in. Both offer the option of paying in monthly or bi-weekly installments, making it easier for drivers to afford a pre-owned car, truck, SUV or van. But both also come with their own advantage and disadvantages, depending on your needs, financial situation, and driving habits.
Not sure which is right for you? Take a look at the differences between leasing and financing a vehicle to see which one might be a better option.
Leasing a Vehicle
Leasing often has the advantage of coming with cheaper costs, but the disadvantage of temporary ownership.
A lease means that you’ll get the vehicle for a pre-determined amount of time in exchange for bi-weekly or monthly payments. Once your lease term is up, you can return the vehicle and choose to purchase it (with financing as an option) or lease another. Because you aren’t paying to own it permanently, your rates will likely be less expensive than they would if you financed a vehicle.
However, with leasing, you won’t be able to drive the car past a certain amount of kilometres, so you’ll need to watch how far and how often you take it out for a spin. You also won’t be able to make any modified changes to the vehicle: you’ll have to give it back in the same condition you found it. This also brings to mind the fact that the car is not truly yours, a potential problem for those who prefer the feeling of pride of ownership.
If you want a less expensive, shorter-term financial commitment for a vehicle and don’t need to take it too far or drive too often, are okay with not changing its condition, and are prepared to give it back after a time, then leasing may be a better option for you. However, if any of these don’t sit right with you, then read on to see if financing is a more ideal fit.
Financing a Vehicle
Financing usually comes with higher prices, but full-time ownership of the vehicle.
With financing, you take out a loan from a financial institution and pay it back in bi-weekly or monthly installments with interest. The amount and interest you pay is agreed upon between you and the dealership from which you purchased the vehicle.
As mentioned, financing usually costs more than leasing does, but when the car is paid off, it’s yours to keep. You’re paying for permanent ownership, not just temporary usage.
Unlike leasing, there’s no limit to how far or how often you can drive, and if you’d like to make any modifications to the vehicle, such as a paint job or new rims, you can.
In general, you get much less in the way of restrictions when you finance a vehicle. However, you need to be wary of the fact that this is a much longer-term financial commitment than leasing, so be sure you’re comfortable with several years of monthly payments if you choose to go this route.
Overall, financing is an ideal option if you’re okay with more expensive, longer-term payments, and if you’re looking to own a vehicle and don’t want any limitations on how far or how often you can drive or what kind of modifications you can make to it.
Contact us to Learn More
Still not sure if leasing or financing is right for you? Talk to one of our friendly staff today and they’ll help you decide which option fits your needs, financial situation and driving habits!