Leasing vs. Financing a Car: What’s the Difference?
Is it Better to Lease or Finance a Car?
Trying to decide between leasing or financing a car can be challenging. On one hand, leasing a vehicle provides you with lower monthly payments and the ability to drive a newer model that you might not be able to afford otherwise. On the other hand, financing a car allows you to have complete ownership of the vehicle as soon as you’ve finished paying it off.
At the end of the day, choosing whether to lease or finance a car depends on your priorities and what you are looking for. Let’s take a closer look at the difference between financing and leasing a car, as well as the pros and cons of each.
The Difference Between Leasing vs. Financing
Before deciding whether to lease or finance a car, it is important to understand the key differences between the two options. Most people are familiar with the concept of financing a car, which typically involves paying in cash or borrowing money from a lender. When you get a loan, you’ll be responsible for paying it back in monthly car payments until it has been fully paid off. Meanwhile, leasing a car involves renting it from a dealership for a fixed number of miles and months — often two to four years. At the end of the lease period, you can either return the car to the dealer or purchase it for a predetermined amount.
How to Decide Whether to Lease or Finance a Car
Now that you know the difference between leasing or financing a car, let’s take a closer look at the advantages and disadvantages of each.
The Pros and Cons of Financing a Car
It should come as no surprise that one of the biggest benefits of financing a car is the fact that you will eventually own it. While leasing a car requires monthly payments with no equity, the vehicle is all yours once you have paid off your loan. This makes financing a car more cost-effective in the long run. Rather than continuing to make monthly payments, you’ll be able to sell or trade it in for a new set of wheels whenever you’re ready. Because you fully own the car, this also means there are no mileage limits and you can modify the car as much as your heart desires.
The Pros and Cons of Leasing a Car
One of the biggest advantages of leasing a car is the lower monthly payments, which depend on factors like the length of the lease and the set number of miles you can drive the car each year. However, while your payments may be lower when you lease a car, you’re not acquiring any equity in the vehicle with these payments — making leasing more expensive in the long run.
Similar to when you rent an apartment, you will be making monthly payments to rent the car, but will have no ownership once the lease expires. Although this is a major drawback for some people, others still prefer leasing because it allows them to drive a newer, more luxurious model for less than it would cost to finance one. Once your lease expires, you can either return the vehicle and exchange it for a new one or purchase it for yourself — offering more flexibility and less commitment.
Lease or Finance a Car From Burlington Kia
Ultimately, the best choice for you depends on your lifestyle, needs, and preferences. If fully owning an asset and being able to customize it are important to you, then consider financing a car rather than leasing one. It is important to do your research and weigh the pros and cons of each option before deciding whether to lease or finance a car. However, if you’re someone who always wants to have the most up-to-date features and latest technology, then leasing a car may be the best choice for you.