Leasing Vs. Financing A Car: Which Option Is Better?
Key Takeaways:
Leasing requires a lower (or no) upfront payment as compared with financing.
- At the end of a lease period, you can either buy the car or return it to the dealership. So, there is no long-term commitment.
- A car loan pays the entire car’s value plus the interest.
- Financing will typically have higher monthly payments, but you will own the car after the loan is paid off.
- You can sell or trade in the car anytime with the financing option.
- Supreme Ford of Slidell offers convenient car financing services to customers in Alton, LA, and the surrounding areas.
When you're car shopping, you have many decisions to make. Not only do you have to choose the right car for your needs, but you also have to decide how you will pay for it. Car leasing and financing are both popular options, but they're very different. So, which one is the best option for you?
Supreme Ford of Slidell will discuss the pros and cons of both to help you determine which is more suitable for your needs and budget.
Car Leasing
Leasing a car is similar to renting a car from the dealership for a set time, usually two to four years. You'll pay monthly installments and maintain a mileage limit during that time. You can purchase or return the vehicle to the dealer at the end of your lease.
1. Leasing Pros:
Some benefits of leasing a car include:
- Lower monthly payments than with traditional financing.
- No need to worry about selling the car or finding a buyer when your lease is up, as you can turn it into the dealership.
- You can easily switch to a new car by terminating the lease and getting another one.
2. Leasing Cons:
- You never truly own the vehicle.
- When your lease expires, you must return the car to the dealer unless you purchase it. In this case, you'll start from scratch because you'll be making payments on a new car.
- You may face hefty penalties if you exceed the mileage limit or damage the vehicle. You may also be fined for any significant wear and tear that the car has occurred during your use.
- Car leasing may require you to put down a substantial security deposit.
Car Financing
In contrast, financing a car entails taking out a loan from a bank or credit union to cover the entire cost of the vehicle. Once you pay off the loan, the car is yours with no restrictions on mileage or wear and tear of parts as there would be with leasing.
Now that we know the basics of financing a car, here are some pros and cons of this option:
Financing Pros:
- After making your final payment, the car is yours to do as you please; no need to worry about returning it or making another purchase.
- If you keep the car for an extended time, you'll eventually have investment value in it.
- Mileage limits are not something you need to concern yourself with, so if you want to take a cross-country road trip, go for it!
Financing Cons:
- With a loan, you may have higher monthly payments than leasing. However, it varies depending on the length of your loan, credit score, and downpayment.
- If you want to end the loan early, you probably will have to pay a pre-payment penalty.
- You're responsible for the maintenance of the car, unlike when leasing, where the manufacturer or dealership typically covers it.
So, What's the Verdict?
If you're looking for flexibility, financing is the way to go. You can own the car outright and do whatever you want with the car. You can sell it, exchange it with another vehicle, or keep it forever. Car financing builds your equity or the portion of your car's value that you own outright. If you sell or trade-in your vehicle, you'll be able to pocket any equity you've built up. It is considered a wise investment as cars these days tend to appreciate with time which may nullify or even capitalize your cumulative installments paid during your financing term. On the other hand, leasing doesn't offer this opportunity because you don't own the car – the dealership does.
Car financing requires a larger down payment than leasing. You'll also be on the hook for any repairs or maintenance that your car needs over the life of the loan. And, if you miss your installments or default on the loan, your credit score will take a hit.
The monthly payments in car financing are usually higher than those on a leasing contract. However, you can lower it if you increase your down payment since it will reduce your liability share in the car's value.
Some people choose to lease for its lower monthly payments, while others prefer the prospect of being able to own their vehicle after paying off the loan.
In the end, it falls to what your priorities and driving habits are. If you don't mind making monthly rental payments and always want access to the newest car models, leasing might be a good match for you.
Do in-depth research to get the best deal, regardless of whichever option you choose. If you're still undecided, talk to your financial advisor or automobile dealer for guidance. They can evaluate your preferences and budget to assist you in making the best decision based on your needs.
Also, please read our blog on the benefits of purchasing a certified pre-owned car.
Need Car Financing Services in Alton, LA? No Problem!
At Supreme Ford of Slidell, serving Alton, LA, we strive to give our clients the best car-buying experience possible. Our new and used inventory is updated regularly, so browse our site today! Our dealership is committed to making your dream of owning a great car a reality. We offer competitive financing rates so you can get behind the wheel of your dream car today. If you're ready to start shopping, apply for financing. We can't wait to help you find your ideal vehicle.