Finance vs Lease
If you are thinking about getting a new vehicle, you’ll need to consider whether you want to finance your vehicle or lease it.
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Financing
Financing your vehicle is where you borrow the money to buy it. You pay regular payments to the lending company. Leasing your vehicle is where you borrow the vehicle and pay regular payments to the company lending it to you.
With financing, you own the car. If you cannot make payments, the lending company will repossess the car to try and sell it and recoup what they couldn’t collect from you. With leasing, the dealership owns the car. If you cannot make payments, the dealership will repossess the car to try and recoup what they couldn’t collect from you.
The key difference between the two is who owns the car. This difference will impact how you drive the car and what you do with the car at the end of the loan period.
Leasing
With financing, you own the vehicle. When the loan is over, you own the vehicle “free and clear” and can continue driving it, resell it, or whatever. The advantage to you is that you own the vehicle and are free to do whatever you want. The disadvantage is that you own the vehicle and are now responsible for selling it.
With leasing, the dealership owns the vehicle. At the end of the loan period, they would like to get the vehicle back in great shape to resell it. The advantage to you is that you’re paying a small monthly fee to drive a nice new vehicle, and you don’t have to worry about selling it at the end of the loan. The disadvantage is that the dealership might charge you extra for mileage over a specified annual mileage allowance, or they might charge for cleaning and repairing the vehicle when you’re done.
Which Is Right For You?
That depends on you, of course. Financing might be the way to go if you want to own your vehicle and not worry about the shape you’ll return it in at the end of the loan. If you are okay with paying extra if the dealership doesn’t feel that the vehicle is pristine, then leasing might be your preferred option.
