Financing vs. Leasing A Car
It’s the age-old question: should I lease or should I finance my next car? First off, it is crucial to understand the fundamental differences between a lease and a loan before making any decisions.
If you are planning to take out a loan, you will be making payments on the entire cost of the vehicle. This means that the total price of the car is stretched out over the length of the term. Therefore, the longer the term, the lower the overall payments and interest rates are going to be. However, it you are planning on leasing, you are only responsible for payments based on the car’s depreciation for the number of years you are driving it, because the car is returned when the term ends. This means that since you will be borrowing less, these payments will be smaller.
Aside from this, there are many other factors to consider:
Finance Charges (Interest Rates).
Generally speaking, these will be higher when you lease because you are paying back the loan at a slower pace than you would with a loan. However, most of the time, even with these higher rates, the monthly payments for leasing is smaller.
Cash Flow.
Due to the fact that you are borrowing less when leasing a car, your monthly payments will be smaller as a result. This is something important to consider.
Wear and Tear.
Be honest with yourself and take into consideration how you generally treat your vehicle. Most leases offer warrantees on the vehicles because they are brand new. However, if you are someone who is prone to scratches, dents etc., you may want to re-think leasing because there is a wear-and-tear fee, which could end up costing you.
Equity.
You do not own the vehicle when you lease and more times than not, by the time you return the vehicle, you will have spent more money in interest charges than anything else.
Our team has extensive experience in addressing these issues so feel free to call us and book a free no obligation consultation with one of our debt solutions’ experts.
Call this number (416) 736 4357 to get our advice specifically tailored to your situation. We look forward to assisting.