Leasing Vs. Financing A Car: Some Important Questions To Ask

Key Takeaways:

• Auto loans and car leasing are two ways to finance a car when you can’t afford to pay the upfront cost of a vehicle.
• Car leasing is when you agree to pay a certain amount for a fixed period, but you have limited mileage since you don’t own it.
• When you take out a loan, you pay a monthly installment to own the car over a period of time.
• You need to consider factors like mileage restriction, your budget for the down payment, and the end-of-the-term option when choosing between the two!

Most people don’t have the money to buy a new car outright. So, they choose alternate options, including car financing or leasing. Both have pros & cons, so it’s crucial to understand the differences before deciding.

In this blog post, we’ll walk you through a few questions to ask yourself when choosing between leasing and financing. By taking the time to answer these questions, you’ll be able to successfully finance your next vehicle according to your needs and budget. Keep reading for more information!

What is Car Leasing?

Car leasing is when you agree to pay for the use of a car for a set period. At the end of the lease, you can either return the car or buy it outright. This is a good option for people who don’t want to commit to owning a car long-term or who want to drive a new car every few years.

A few things to consider when leasing a car are given below.

• First, you’ll have to make monthly payments for the duration of the lease. These payments will be higher than if you were financing a car since you’re only paying for the use of the vehicle and not the entire purchase price.
• Second, you’ll need to be careful of mileage restrictions. Most leases limit the miles you can drive per year; if you cross that limit, you’ll have to pay additional fees.
• Finally, you’ll need to keep the car in good condition. If there’s significant wear and tear when you return the vehicle at the end of the lease.

Now that we’re aware of the basics of leasing a car let’s explore how to take a loan for car financing!

What is Car Financing?

A car loan is financing given to purchase a vehicle. You make monthly payments until the total borrowed amount has been paid back, and the car becomes yours.

You need to keep a few things in mind when financing a car.

• First, you’ll need good credit to get approved for a loan.
• Second, you’ll need to make a down payment. The larger the down payment, the lower your monthly payments will be.
• Finally, remember that you’re responsible for the car if something happens to it. If you lose your vehicle in an accident or get stolen, you’ll still be on the hook for the loan.

Difference Between Leasing and Financing

Leasing a car is similar to financing, but there are a few differences!

• When leasing your car, you’re only paying for the use of the car during the lease term. You don’t own the car and are not responsible for its long-term upkeep.
• When you finance a car, you take out a loan to pay for the vehicle. Once you’ve paid off the loan, the car is yours.
• With a lease, you’re usually restricted to a certain number of miles per year. You’ll have to pay the additional fees if you cross the limit. With financing, there’s no such restriction.
• Your monthly payments are usually lower with a lease than with financing because you’re only paying for the portion of the car’s value you use during the lease.

Now that you know the fundamental difference between car leasing and financing, let’s look at the questions you need to ask before leasing or financing your next car!

Questions to Ask Before Leasing or Financing Your Next Car

What’s Your Budget for Down Payment?

When you finance a car, you’ll typically make a down payment and monthly payments for the life of the loan. The loan length will depend on the dealership and your credit score. The average car loan is about 60 months or five years.

With a lease, you’ll make a smaller down payment and monthly payments for the length of the lease. Leases typically last two to four years. At the end of the lease, you can choose to buy the car or turn it in and start a new lease.

What’s the Length of the Term?

The length of your finance or lease agreement will also differ. A typical auto loan is anywhere from 36 to 72 months, while leases are usually 24 to 36 months. Longer terms may be available for both, but they will likely come with a higher interest rate.

Can You Stick to the Mileage Restrictions?

Leasing companies put mileage restrictions in place to avoid excess wear and tear on the vehicle. The average is 10,000 to 15,000 miles per year, but some leases allow for more—be prepared to pay extra if you exceed the limit. With a loan, there are no mileage restrictions. You can quickly drive as much or as little as you want without penalty.

What Are the End-of-Term Options?

When your finance agreement ends, you will own the car outright and can do with it as you please. With a lease, however, you will need to return the vehicle to the dealership unless you choose to purchase it outright (which is usually an option).

Leasing Or Financing: Which Is Right for Me?

So, what’s the best option for you? Ultimately, your final decision depends on your specific circumstances and needs. Consider your budget, how much driving you do, and what you plan to do with the car before making a decision.

Eastern Shore Hyundai serving Theodore, AL, is the best car dealership in Alabama, and we want to make it easy for you to get into the vehicle you need and deserve. That is why we provide fantastic car financing rates and terms on our wide range of new and used trucks, cars, and SUVs. Our finance experts are ready to assist you through financing and get you into your new automobile.

So, if you’re ready to start the financing process, come to our dealership and follow the essential tips to test-drive your vehicle!

Apply for financing now!