When buying a car, you'll have to decide whether to lease or finance your vehicle. Both options have upsides and downsides, and determining the best option for you can be challenging. Honda South will break down the differences between leasing and financing a car so that you can make the best decision about which choice is right for you.
Car Leasing
When you lease a car, you are essentially renting it from the dealership for a set period. You will pay monthly payments on the vehicle, and at the end of the lease term, you can purchase the car at the market price or some discount if offered or return it to the dealership. So, you will never own the vehicle outright and may have to pay penalties if you don't meet the terms and conditions of your agreement.
Car Financing
If you finance a car, you will take a loan from a bank or other lending institution to pay for the vehicle. You will then make monthly payments on the loan and own the car outright at the end of the loan term. You can be stress-free about incurring any penalties while using the vehicle. However, you will have to pay higher monthly payments than if you were to lease a car.
Comparing Pros and Cons of Car Financing Vs. Car Leasing
If you're thinking about financing or leasing a new car, it's essential to understand the difference between the two options. Both have positives and negatives, so weighing all your options before deciding is crucial. Here are the factors to consider before you make your decision.
1. Car Ownership
When you take car financing, you get a loan to pay for the vehicle. Once you've paid off the loan, the car is yours to keep. You can sell it, trade it in, or keep it for as long as you want. Leasing doesn't give you car ownership until you buy it at the end of your term at a discounted value or the market price, whichever you can negotiate with your dealership.
All your monthly payments in the lease will not be adjusted to the price of the vehicle, unlike financing, where they include the cost of the car and the markup charges in the monthly installments.
2. Restrictions
With leasing, you'll have to adhere to certain restrictions by the dealer or leasing company. For example, you may be required to keep the car in good condition, and you may be limited in terms of how many miles you can drive.
Mileage restrictions in lease contracts are usually 12,000 to 15,000 miles per year. You'll be charged a fee for every mile you drive above if you cross the limit. The cost of exceeding the limit can accumulate quickly, so evaluate how much you typically go to adjust the allowed mileage figure in your lease agreement accordingly. You can extend the yearly distance coverage by paying an additional fee.
So, you must be careful during your lease period that you don't take any unplanned trips that may increase your miles. However, financing allows you to go anywhere around the country without caring about the distances.
3. Monthly Payments
Another advantage of car leasing is that you'll typically have lower monthly payments than financing. That's because when you lease a car, you're only paying for the usage of the vehicle - not the entire value of the car. On the other hand, you're essentially paying for the vehicle's total value over your payment period with financing along with the applied interest rate. As such, your monthly payments will be higher.
4. Damage or Wear and Tear Responsibility
If you lease a vehicle during your lease term, you are responsible for any damages incurred, including dents, scratches, and even tire wear and tear. The leasing firm may charge you a fee if you return the automobile with significant damage during your term.
On the other hand, financing always includes insurance coverage and a few free maintenance services as an add-on, mainly covering you for maintenance and repair services.
5. Approval Criteria
Leasing a vehicle is generally easier to approve than car financing because, with leasing, you're only responsible for the depreciation of the car during the time that you have it. With financing, however, you're required to pay off the entire loan amount plus interest.
6. Refinancing or Trading-In Options
If you finance a car, you can renew your loan if interest rates drop or your credit score improves. You can also opt to trade in your vehicle or pay a higher downpayment to lower your monthly payments. With leasing, neither of these options is available. You're stuck with the terms of your lease until it expires, or you terminate it early.
7. Residual Value
At the end of a lease, you are usually given three options. You can purchase the car for its residual value, turn in the keys and leave, or get a new lease on a different vehicle. With financing, you own the car outright once you've made your last installment or decide to settle earlier by paying the outstanding amount along with the pre-payment penalty.
So which option is right for you? It depends on your needs and preferences. Financing may be the better option if you want to own the car outright and have more flexibility in terms of modifications and mileage. However, if you wish to pay lower monthly payments and don't mind returning the vehicle at the end of your lease term, then leasing could be a better choice.
Whatever you decide, make sure you do your research and shop around for the best deals. And remember, it's not a black-and-white situation when choosing between financing and leasing a car. It all depends on your needs and circumstances. So, be careful as you choose.
Need Car Financing or Leasing Services in Jonesboro, GA? No Problem!
Ready to take the next step? Contact Honda South serving Jonesboro, GA, today and let us help you find your perfect car. From our fantastic selection of new cars and certified pre-owned vehicles to the best possible customer and car care services, we have everything you need to make your car buying experience unforgettable.
Apply online today or talk to our finance department for consultation. We can't wait to help you drive away in your dream car.
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