One of the biggest decisions you’ll make when purchasing a car is whether to finance or lease it. Both options come with their own pros and cons, and what works best for you depends on your individual circumstances. In this blog post, we’ll go over the advantages and disadvantages of financing and leasing a car so that you can make an informed decision.
Financing a Car
When you finance a car, you take out a loan to pay for the vehicle and then make monthly payments until the loan is paid off. Here are some advantages and disadvantages of financing a car:
Advantages of Financing a Car
Ownership: When you finance a car, you own it outright once the loan is paid off. This means you can sell the car whenever you want, and you can customize it however you like.
Lower Long-Term Cost: Although your monthly payments may be higher than if you leased a car, once the loan is paid off, you no longer have any car payments. You also have the option of keeping the car for many years, which can save you money in the long run.
No Mileage Restrictions: When you finance a car, there are no mileage restrictions, so you can drive as much as you like without worrying about extra charges.
Disadvantages of Financing a Car
Higher Monthly Payments: Monthly payments for a financed car are typically higher than those for a leased car, because you are paying off the full purchase price of the car.
Depreciation: Cars depreciate in value over time, so if you decide to sell your financed car before it is paid for, you may not get as much money for it as what you have owing. This is especially the case if selling the car early in the term of long term finance.
Maintenance and Repairs: Once your car is out of warranty, you are responsible for any maintenance and repairs, which can be expensive.
Leasing a Car
When you lease a car, you essentially rent it for a period of time, typically three to five years. At the end of the lease term you have the option of returning or purchasing the vehicle. Here are some advantages and disadvantages of leasing a car:
Advantages of Leasing a Car
Lower Monthly Payments: Monthly payments for a leased car are typically lower than those for a financed car because you are only paying for the car’s depreciation during the lease term, not the full purchase price.
Lower Upfront Costs: Lease agreements typically require lower upfront costs than financing agreements, so you may be able to get into a nicer car for less money.
Warranty Coverage: Most lease agreements include a warranty that covers the term of the lease, so you don’t have to worry about unexpected expenses.
Disadvantages of Leasing a Car
Mileage Restrictions: Lease agreements typically come with mileage restrictions, so if you drive more than the allotted amount, you may have to pay extra fees. If you buy the vehicle at the end of the lease you won’t have to pay for the additional mileage that was driven.
No Ownership: When you lease a car, you don’t own it, which means you can’t sell it or modify it.
Long-Term Cost: If you continue to lease cars over the long term, you will continue to make monthly payments, and you will never own a car outright.
Which option is better for you?
There is no one-size-fits-all answer to this question. It depends on your individual circumstances, including your budget, driving habits, and long-term goals. Here are some general guidelines to consider:
If you:
- Want a new car every few years
- Don’t drive a lot of miles
- Want to fix your credit score
Then leasing a car may be the better option for you.
If you:
- Plan to keep the car for a long time
- Drive a lot of miles
- Want ownership and the ability to modify the car
- Are willing to take on the responsibility of maintenance and repairs
- Want to fix your credit score
Then financing a car may be the better option for you.
Financing a car with Legacy Auto
We understand that financing a car when you have bad credit can be a daunting task, as there are numerous options and variables to consider. That’s why we recommend speaking with one of our knowledgeable and compassionate in-house credit helpers to go through your options for in-house finance.
At Legacy Auto Credit we offer both financing and Lease options. Our team will lend a patient ear to your unique story and guide you through the best course of action for securing a car loan and rebuilding your credit. If you’re located in Southern Ontario, don’t hesitate to reach out to us. We are committed to providing you with the assistance you need.