Lease Vs Finance - Know the Difference
Lease Vs Finance - Know the Difference
Posted on January 19, 2021
The purchase price of a vehicle involves a lot more money than a buyer might have on hand. With the average new car price hovering around $35,000, many people look to vehicle financing in order to bring home their next car. There are two main ways to pay for a car: leasing and financing.
Vehicle Finance Options
Leasing involves paying a monthly payment, which is similar to a rental fee. Drivers lease, or rent, a car for a specific amount of time, agreeing to stay under a specific number of kilometres. At the end of the lease term, the driver returns the car to the dealership. At this time, drivers can decide to buy the vehicle for a reduced price, lease a different vehicle, or purchase a different vehicle.
Financing a vehicle means agreeing to pay a certain price for a vehicle over a specific period of time. Buyers take out an auto loan, which has a set number of monthly or bi-monthly payments until the vehicle is paid in full. Manufacturers usually offer low-interest car loans on brand-new vehicle purchases.
Purchasing a Vehicle
Purchasing, or financing, a vehicle with an automobile loan is the most common choice among those looking for a new vehicle. Financing is the best option for those who want to own the vehicle for a long time to minimize costs. It is also the best option for those who drive a lot of kilometres and would have trouble staying under lease kilometre agreements.
Financing is the best financial decision for drivers who want to purchase a car, pay off the loan, and continue to drive the car payment-free for many more years.
Leasing a Vehicle
Roughly 25% of people lease a vehicle. While it is not quite as common as financing, it is an ideal choice for those that want lower monthly payments, don't want to worry about maintenance, and want a short-term commitment. Lease agreements will have drivers paying roughly half of the monthly payment required if they purchased the vehicle outright.
Leasing is a great option for drivers who need an updated vehicle frequently for business or personal purposes, and a good choice for those who just like to upgrade more quickly than others.
Financing and leasing both have their advantages and disadvantages in the world of car buying. It is important to consider all circumstances before committing to the overall cost of a new vehicle.