Looking for a new vehicle can be exciting, but deciding whether to lease or finance depends on your long-term objective. Do you intend to keep the vehicle for its life? If yes, then a loan is the best option for you. If you want to get a new vehicle every few years, you might want to consider leasing. In the end, it depends on the level of ownership you prefer, as well as the financial commitment.
Pros & Cons of Leasing
When you lease a car or truck, you will pay less monthly than when financing one. You can return it to the dealer and lease a new vehicle in 2-3 years if you so choose. If you are a business owner who can deduct the expenses of the car, it makes sense to lease. Plus, the vehicle will most likely remain under warranty during your contract period.
However, a lease is a rental. At the end of the lease term, you will have nothing to show for your payments. You also need to monitor your kilometers; most leases have a maximum mileage, and if you go over that, you must pay for the extra kilometers. A lease will only cover normal wear and tear; therefore, if there is more than “normal” damage, per the dealer, you will have to pay for those repairs. The key is to understand in detail how the dealer defines normal wear.
Pros & Cons of Financing
When you take a loan, you own the car when the loan is paid in full. This also means you are driving the car for free, outside of gas and maintenance, at the end of the payment term. You can modify the vehicle as you please and drive it as long as you want.
On the other hand, when you purchase a car, you are also responsible for maintenance as the car ages. You will likely go beyond the warranty period. You are also paying the same amount even as the car depreciates. You will also have higher monthly payments for the term of your loan, but you’ll have something to show for it once you’ve repaid the loan.
Finally, insurance is slightly higher for leases. Dealers often make you pay more for third-party coverage and push for more add-ons like a comprehensive collision.
Whatever route you choose, be sure to research beforehand so you can happily drive off in a new car.
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