In the US,there are already around 276 million vehicles that are registered with the DMV. It is known that 30% of these vehicles are leased and the rest are financed or already owned. When it comes to choosing a vehicle to drive, you do have the option to either lease or finance the vehicle.
The difference between the two isn’t really hard to understand. Financing a vehicle simply means taking out a loan to purchase and own the car of your choice. Meanwhile, leasing a vehicle means that you’re only going to use it for a specific period of time. Basically, you’ll just borrow the vehicle from its lien holder.
Now, don’t get confused about renting and leasing a vehicle as well. Renting a vehicle is still different from leasing as the latter means that you will be using the vehicle for a long time. Typically, a vehicle lease could last at least two to four years. Renting, on the other hand, could only last for a few hours or weeks.
People have different reasons as to why they’d rather finance or lease a vehicle. Primarily, many people prefer to lease a vehicle to avoid paying high monthly premiums. Sometimes, it could also be because they want to drive different cars ever year or two.
Of course, buying a vehicle through financing can be more expensive than leasing, but the main benefit of doing this is that you get to own the vehicle after paying off your loan. The thing about financing is that banks or financial institutions would of course charge you interest from your loan. However, if you’re lucky because of your good credit, you can still score a vehicle loan with zero interest.
When it comes to figuring out whether financing is better than leasing or vice versa, this will really depend on a few factors like your income, lifestyle, and overall preference.
Financing a car
Choosing whether you should finance or lease a vehicle isn’t really just about money. Your preferences should help you decide on this. If you’re thinking of financing a car, here are the main benefits that you can get:
Long-term saving – While monthly payments for leasing a vehicle is generally cheaper than financing, buying your own car is still cheaper in the long run. After paying off your loan, you still get to drive the vehicle without having to make monthly payments anymore.
You can choose to sell – once you have fully settled your vehicle loan and you already have the lien to yourself, you can do whatever you want with the car, and that includes selling it.
No mileage limit – Unlike leasing a vehicle, mileage wouldn’t matter if you will eventually have the lien of the car.
Cheaper insurance coverage – having your vehicle insured is a requirement and leasing may require you to get certain limits with your insurance coverage. The leasing company owns the vehicle and so they want to be sure that the vehicle is insured the best way, which translates to paying for a more expensive insurance coverage.
Leasing a car
Meanwhile, here are the benefits of choosing to lease a vehicle:
Lower monthly payments – If you just really don’t plan on buying your own vehicle just yet, leasing is the best and cheaper way for you to get a vehicle without having to pay huge sums each month.
The freedom to drive new cars – this is one of the mst common reasons why people choose to lease. They get to drive the latest vehicles every few years. If you’re into trying out new vehicles, then leasing is simply ideal for you. ‘
No need to sell the vehicle – while many people would see selling their vehicles as a good way to earn money, many also sees looking for a buyer to be effortful and tiring. When you lease a vehicle, you just need to return the vehicle and decide on what you want to drive next.
Loan approval isn’t necessary – many financial institutions are not as strict as how they are with financing a vehicle. Leasing means they still own the car so it’s easy for them to repossess what’s theirs. This is why many financing companies don’t heavily rely on credit scores to approve a lease. This is beneficial for people who are still trying to build their credits.
Whether you choose to finance or lease a vehicle is completely up to you. The better option really depends on what you can afford, why you need a vehicle, and what your goal is in the long run. Lastly, always make sure that you always read the terms and agreements of your lease or purchase through financing before you sign anything!