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Financing Versus Leasing a Vehicle – Weighing the Options
Owning your favorite car may be your dream, or maybe there’s a new model that you want to purchase. However, you need to know that buying a vehicle is a significant expense.
There are several pros and cons to consider when comparing financing vs. leasing a vehicle, and you need to know of all these points before making a decision.
The pros of financing a vehicle or a car While considering the pros and cons of financing vs. leasing a vehicle, keep in mind the following pros of buying a car:
You can customize it: Owning a car gives you the freedom to modify its looks or change parts as per your preferences. You can start doing it right after you buy a vehicle.
You can sell it anytime: You can sell the car anytime you wish to, even before the payment term is over.
No mileage limitations: You can drive as many miles as you wish to when you own a car, as there are no clauses and mileage restrictions.
Save money in the long term: When you finance a car, you pay only for the given period. Once you complete the loan term, only maintenance costs are incurred, which are relatively lower.
The cons of financing a car
Repair costs after the warranty period: Buying a car comes with a limited-time warranty that covers repair costs. Once the warranty expires, you have to shell out money from your own pocket for repairs and maintenance.
Higher monthly payments: The EMIs for the entire purchase price of the vehicle are higher payments as compared to leasing. In most cases, you also have to pay a significant down payment depending on your financial situation.
Depreciation costs: Depending on the brand, model, and other features, the value of your vehicle will decrease significantly with each passing year.
The pros of leasing a vehicle Now, read on for the pros and cons of leasing a vehicle so that you can make an informed decision:
None or very low down payment: A leased vehicle often doesn’t require any down payment. Also, in case a down payment is needed, it’s very low.
Usually covered by a warranty: Leased vehicles are covered by a warranty that includes free oil changes and other maintenance costs.
Lower monthly payments: Since you do not own the vehicle, the lease amount is lower than monthly EMIs in the case of financing.
No depreciation issues: Again, since you’re not the owner, depreciation costs don’t concern you.
The cons of leasing a car Knowing the disadvantages of leasing a car is an important part of understanding the pros and cons of financing vs. leasing a vehicle:
Includes additional costs: You will be paying a significant amount in the long run that includes mileage penalties and security and license fees.
Additional fees and penalties: In the case of leasing a car, the costs go up by early lease termination fees, higher insurance premiums, and the cost of excessive wear and tear.
Dual leasing expenses: If you lease more than one car at a time, your monthly payments double up and go on for a long time.