Finance vs Lease?
Welcome to another blog post with Carfinance.credit by Bell Auto. If you want to get yourself a vehicle in Canada, you have three options; pay with your own money, financing the vehicle, or leasing a vehicle. Here we will talk about the difference between financing and leasing a vehicle.
If you have something in your mind about getting a new or new-to-you car, you will need to know whether you want to finance your vehicle or lease it.
So which one is the best choice for you? There is no specific answer to this question. Some people will always finance their vehicles and others who have leased, always will continue to lease, or maybe not. Let’s keep reading.
Leasing a Car
If you wonder what it means to lease a car, here is a simple breakdown. Basically, leasing a vehicle means having a long-term rental. It allows you to drive a new car or new-to-you car for a certain period, they typically last anywhere from 2 to 5 years. When you are leasing a car, you are actually paying for the right to use it as your own. When your lease is finished, you simply return your vehicle or finance the remainder.
Financing a Car
When financing a vehicle, you basically borrow money from a financial institution in the full amount of the vehicle and pay it back in regular installments with interest. Payments will be higher than a lease but the benefit is after your finance loan is paid, you own the vehicle, therefore have an asset (monetary value).
For financing options in Carfinance, we work with many lenders. Come and visit us or fill up our short form credit application by clicking here. We can apply in-house eliminating the need for you to go to the bank and attempt to get a loan.
Which one is better to lease or finance a car?
Before you decide about leasing or finance, the first thing is to understand your driving needs and habits and don’t forget to understand which option makes the most financial sense.
Before deciding, you might want to ask one of these questions.
· How much can I afford for my monthly payment?
· Do I want something to trade in on my next vehicle?
· How many approximate kilometers am I going to drive?
Choosing a car might be an emotional decision, and you should be sure to make a rational decision.
Also, you may want to ask a few other questions. Such as:
· Do you want to add any modifications to your new vehicle?
· How long would you want to keep your car?
What is the key difference between leasing and financing?
The main difference between leasing and financing is vehicle ownership. If you want to go with a financing option, you will be the owner of your vehicle. Leasing doesn’t work like that. When you finish your lease agreement, you return your car. It was never your property, meaning the leaser has some set rules you will have to follow while driving their vehicle.
With financing, every payment you make goes toward paying off your loan, and once the loan is paid off, it is yours to sell, keep, or even trade-in as cash value towards a newer vehicle.
Pros and cons of financing and leasing
Car ownership:
- Financing: When you decide to finance a vehicle, you will fully own that vehicle at the end of your agreement.
- Leasing: You don’t own the vehicle; you just have the right to drive it. You also have the option to purchase for the residual value specified in most agreements.
Mileage Limits:
- Financing: No limit on how many kilometers you drive.
- Leasing: You are limited to the amount discussed in the agreement (eg: 10000km per year). If you drive more than the contract or agreement specifies you will be penalized for every extra kilometer.
Modification or Customization:
- Financing: It is your car, and you can do whatever you want.
- Leasing: You have to keep the vehicle as it was given to you, any modifications will result in a penalty.
Ending the Agreement Early:
- Financing: If you want to sell or trade it in, you can do it whenever you want or need to. But don’t forget that you still need to pay off the outstanding loan amount, which can be added to a new loan if needed.
- Leasing: In many cases, you may be charged a fee for breaking the lease before the term expires. These costs can be quite high depending on how much longer is left on your term.
Returning the Vehicle
- Financing: When you are done with your payments, the car is yours. You can do whatever you want. If you want to sell or trade it in, you can do it.
- Leasing: You should bring your car back to the company where you leased it. You might have to pay some end-of-lease fees.
After our explanations above, the decision is entirely yours. You decide whether you want to lease or buy with financing. At Carfinance, we are here to answer all kinds of financing questions.