What’s Better Leasing or Financing a Vehicle?

December 17, 2019

What’s Better Leasing or Financing a Vehicle?

The choice between leasing or financing a vehicle depends on the car buyer’s goals. There are advantages and disadvantages to both vehicle financing options.

Advantages of Leasing a Vehicle

  • One advantage of leasing a car or truck is the lower monthly payment. New car leases have monthly payments ranging from 30%-60% lower than car loans. The lower payment is because the buyer is only paying for the use of the vehicle and not the full value. At the end of the lease, the car dealer owns the residual value. If a car shopper is looking for a new vehicle with a low monthly payment, then a lease deserves some consideration.
  • Leasing a car or truck is an option for a driver who wants to drive a new vehicle every two to four years without the hassle of selling or trading in an old vehicle. Leasing allows you to drop off the used car at the end of the lease period and lease a new vehicle of your choice.
  • By leasing a vehicle every two to four years, the driver avoids large maintenance costs as the car is under warranty.

Disadvantages of Leasing a Car or Truck

  • While leasing a vehicle has a lower monthly payment, it is the more expensive option in the long term. The lessee always has a monthly payment and never owns the vehicle. In contrast, when a car loan is paid off, the driver owns the vehicle without having to make monthly payments for as long as the car is on the road.
  • Leasing a vehicle means that you never own the car unless you buy it at the end of the lease.
  • Car and truck leases have mileage limits with penalties up to $0.20/kilometer. If you drive just a thousand kilometers over the limit, it’ll cost an extra $200.
  • The lessee is responsible for excessive wear and tear to the vehicle like scratches, dents, and torn upholstery.
  • It’s difficult to qualify for a lease with bad credit.
  • It’s rare that you can lease a used vehicle.

Advantages of Financing a Vehicle

  • When you buy a car through financing, the ownership is transferred into your name. You have the freedom to drive as many kilometers and make any modifications you want.
  • Once the car or truck loan is paid, the remaining value is the buyers. It becomes your asset with no more monthly payments.
  • A purchased car can be used as a trade-in or act as a down payment on another vehicle.
  • It’s much easier to finance a used car than it is to lease one.
  • It’s much easier to be approved for a bad credit car loan than it is to qualify for a lease.

Disadvantages of Financing a Car or Truck

  • Monthly payments are generally higher however some financing companies will accept lower payments over an extended period.
  • You won’t be driving a new vehicle every couple of years. You’re buying for the long term and that’s agreeable to you.
  • Financing a used car means the buyer is responsible for maintenance and repairs.
  • Bad credit car and truck loans generally carry a higher interest rate.

Weigh the Pros and Cons

As with any life decision, there are pros and cons that need to be considered. The choice you’ll make will be based on your unique circumstances. If it’s low monthly payments on a used car, truck, SUV, or minivan that you’re looking for then check out the financing options at YourCarLoan.ca. Through their network of private lenders and used car dealerships across Canada, they will hook you up with a vehicle of your choice at a location near you.

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