Leasing vs. Financing a Car
Apart from buying a home, buying a car is another major expenditure. Purchasing a car at full price can significantly dwindle your savings. Alternatively, you can finance your car purchase via an auto loan. Furthermore, you can consider leasing a vehicle. While leasing is a car is less expensive, in the long term, buying a car has higher returns. Understanding the advantages and disadvantages of both will help you decide between leasing and financing a car. Read on to know how to decide between leasing and financing a car. Advantages and disadvantages of leasing The lease amount is often lower than the EMI amount of the car You can drive a model that is unaffordable with an auto loan Switch cars every two to four years Warranty is valid for the entire lease period, reducing expenditure on regular maintenance Once the existing lease expires, you do not have to worry about reselling the car and choosing another model; you can simply get a new lease and not worry about the resale process To ensure you can pay the lease, you need a guaranteed source of income It is tough to get out of a lease contract before its expiry, and you may have to pay a pre-closure penalty Limitation with mileage allowance (ranging between 10,000 and 15,000 miles per year) beyond which you have to pay an additional mileage fee The lease payout will be higher over the long-term Lease agreements have several additional expenses like license fees, down payment, security, and default penalties Advantages and disadvantages of financing Every monthly installment takes you one step closer to owning the car at the end of the loan duration If you take good care of your car, its resale value can help recover its purchase cost There is no limitation on the annual mileage or customization No end-of-lease charges, wear and tear fees, and penalties When you opt for car financing, you pay the full price of the vehicle over the loan duration, which means the monthly installment is higher than a lease Once the warranty expires, you will have to pay for all repair expenses from your pocket You will have to undergo the process of reselling your car Both have their pros and cons, making how to decide between leasing and financing a car overwhelming.