Finance Versus Lease
Which is better? The choice between financing and leasing depends on individual preferences, financial situation, and lifestyle.
For the same vehicle, price, loan term, and down payment, the cost of leasing is lower than financing.
The cost of leasing is roughly the same as financing, assuming the buyer sells or trades their vehicle at loan-end and the leaser returns their vehicle at lease-end.
The cost of leasing is more than the cost of financing, assuming the buyer keeps their vehicle after loan-end. With financing, once the vehicle has been paid off, the cost is spread over a longer term.
If you want to build equity, enjoy a payment-free feeling after loan payoff, and have the freedom to customize your car, financing is a good option. You should be comfortable with selling or trading in your vehicle and be prepared for unexpected repair costs after the warranty expires. Additionally, a stable lifestyle and a high annual mileage are factors to consider.
- Ownership: You become the outright owner of the vehicle once the loan is paid off.
- Equity: As you make payments, you build equity in the car, which can be used for trade-ins or resale.
- Customization: You have the freedom to modify or customize the vehicle to your liking.
- No Mileage Limits: You can drive as much as you want without worrying about excess mileage fees.
- Long-term Cost: Over time, financing may be more cost-effective than leasing, especially if you plan to keep the car for a long time.
- Higher Monthly Payments: Monthly payments are typically higher compared to leasing.
- Depreciation: You bear the risk of the vehicle's depreciation, which can impact its resale value.
- Maintenance Costs: As the car ages and the warranty expires, you are responsible for repair and maintenance costs.
If you like driving a new car every two or three years, access to the latest technology, safety features, and having a vehicle always under warranty, leasing might be suitable. You should be comfortable with changing vehicles regularly and adhering to a set number of killometers each year. If your lifestyle is subject to change or potential relocation in the next couple of years, and you have no issue taking excellent care of the leased vehicle, leasing could be a favourable option.
- Lower Monthly Payments: Monthly lease payments are often lower than loan payments.
- New Cars: You can drive a new vehicle every few years, enjoying the latest features and technology.
- Warranty Coverage: The car remains under warranty for most of the lease term, reducing repair costs.
- No Resale Hassles: At the end of the lease, you can simply return the car without worrying about selling it.
- Tax Benefits: In some regions, you may have tax advantages on leased vehicles used for business purposes.
- No Ownership: You don't own the car, and you have no equity at the end of the lease term.
- Mileage Restrictions: Most leases come with mileage limits, and exceeding them results in extra charges.
- Wear and Tear Charges: You may incur additional fees for excessive wear and tear on the leased vehicle.
- Penalties for Early Termination: Terminating the lease early can result in significant penalties.
- Long-term Cost: Leasing may be more expensive over time if you continue to lease new cars regularly.