Owning a car is useful for people who enjoy road adventures, as they can stop anywhere they want and explore places at their own pace. But since cars are expensive, those on a budget must look for ways to save money. Car loans and car leases, for instance, are two popular options. A simple way to decide between leasing or financing a car is to compare the benefits of both.
Benefits of leasing a car
Leasing is a process where people rent cars for two to three years. Customers do not need to pay the full purchase price of the vehicle since they are not buying it. Instead, they only need to make a small down payment and drive the car off the lot. After that, they must make monthly payments for as long as they use the car. The dealership may also charge a certain amount in fees and interest. Furthermore, one will have to pay for the depreciation in value the vehicle will suffer during the lease period.
Although one has to make a down payment and set aside money for fees, there are several advantages of leasing a car over buying.
Lower monthly payments
The monthly payments for leasing a car are generally lower than the monthly installments one would need to make to repay a car loan. That’s why people on a budget who are wondering whether they should lease or buy a car might find the former beneficial. Having said that, the monthly charges can vary from one dealership to another. So, customers should shop around and find the lowest rate before signing a lease contract.
Sometimes, the monthly cost of leasing can be high if the dealership has charged a lower down payment. However, one may find that leasing is still more affordable after performing a car leasing vs. buying monthly cost comparison.
Option to switch cars
Car brands frequently launch new models with better performance specs, safety features, and an overall improved driving experience. When someone leases a car, they can choose the latest model and, once the lease expires, switch to another car that’s trending at the time. As a result, they can continue to enjoy new car technology for several years.
Switching cars in this manner is not possible if someone buys the vehicle. While one can sell the vehicle in a couple of years and get a new one, that’s not practical. The car’s value depreciates quickly in the initial years, so one will receive much less than what they paid. For this reason, leasing might be a better option for car ownership.
Warranty coverage
Leasing contracts have a mileage clause for warranty coverage. Generally, the car’s warranty is valid as long as customers do not exceed the month’s mileage limit. Individuals who stay within the limit do not have to worry about significant repairs or maintenance, which helps reduce the cost further. However, if the car is damaged due to negligence, the one leasing must bear the brunt. It’s important to consider this when deciding whether it is better to lease or buy a car for one’s budget.
Benefits of taking a car loan
Financing a car through a loan is a popular option for people who do not have sufficient savings. The loan amount takes care of the cost of the car, so one may only have to make a down payment. However, the lender holds the title of the car in their name till the loan amount is completely paid off. Although customers need to make a small compromise in this manner, they enjoy several benefits.
Ownership
Buying or financing a car allows one to use it on their terms. They do not have any mileage restrictions or other limitations to worry about. With each repayment, the person inches closer to fully owning the car. Once the loan has been repaid, they own the car and no longer have to worry about making more payments.
Option to sell
Once someone owns a car, they can sell it easily whenever they want. The vehicle can even be sold if the loan repayment gets difficult, although the process is a little complex. Leasing does not allow one to do so. One has to wait until the lease is up or find someone to assume their lease, which can be difficult. After selling the car, one can use the amount received to get a discount on another vehicle.
Easy financing
Getting approved for a car loan is easier than getting approved for other kinds of loans because of a lower credit score requirement. The application process is also more straightforward and one can easily find information regarding the documents and other requirements. Furthermore, one can compare the rates at different banks and negotiate for a better deal.
Understanding the pros and cons of car loans vs. car leases can help people determine the right choice. One can use several online car loan vs. lease calculators to know what’s cheaper and decide accordingly.
