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Finance Vs Leasing: Which is Better?

Finance Vs Leasing: Which is Better?

The traditional way of financing a new car purchase is to take out a loan. And while this is still a great way to get behind the wheel, it's not the only option. Car leasing is fast growing in popularity, as it can offer many advantages over a regular loan. However, it's not the perfect fit for all situations.

 

Which is right for you, auto financing or leasing? Read on to find out the pros and cons of each.

 

1) Monthly Payments

 

Monthly Payments

 

With leasing, you can usually get a better quality of car for a lower monthly cost compared to using finance. This is because the repayments you make don't need to cover the full cost of the car, just the depreciation costs and the lease company's fees.

 

2) Lower Down Payments

 

Lower Down Payments

 

To get a great deal on financing, you often need to put down a large payment upfront. If you have a car to trade in, this might not be a problem, but if you're a first-time buyer, it can make life difficult. With leasing, the down payment required is usually much lower, or even zero.

 

3) Length of Term

 

Length of Term

 

When you take out a car loan, you'll usually commit to repayments over five or seven years, depending on how much you borrow and the amount of down payment you make. With leasing, the typical contract is for two or three years.

 

4) Upgrade More Often

 

Upgrade More Often

 

This shorter term also means that with leasing you can upgrade your car to a newer model more frequently. If you want to always be driving a modern car with the latest features, leasing is an attractive choice.

 

5) How Far You Drive

 

How Far You Drive

 

However, there's a drawback with leasing that can make it an expensive option for drivers who rack up a high kilometre total over a year. Most leasing contracts have an upper limit on how far you can drive each year, and the over limit charges can mount up quickly. With car financing, you can drive your car as often and as far as you need to without penalty.

 

6) Credit Rating

 

Credit Rating1

 

Lastly, if you have a bad credit rating, it's usually much easier to get financing than to have a leasing contract approved.

 

So which option works best for you? If you want the flexibility of changing to a new car every few years, leasing will usually work out less expensive. But if you want the full freedom of car ownership, and if you maybe have bad credit, financing is the better route to take.

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