Buying A Car Do I Finance From Dealer Or Bank Auto Loans Vs. Leasing Programs

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Auto Loans Vs. Leasing Programs

Monthly Payments

Generally the payments for a car lease are lower when compared to auto loans. This is due to the fact that in a lease, your payment is only for the amount of the vehicle you use. You may lease a car worth $20,000, for which the dealer decides the value to be $12,000 after three years. You will then only pay $8,000 in addition to a finance fee for the period of three years.

Purchase Price

However should you buy the same vehicle with auto loans for three years, you end up paying the entire $20,000 over three years. The main disadvantage of leasing is that once the three years are over, you return the car to the dealership and are left with nothing even after three years of making payments. On the other side, if you buy, you will own an asset that you can sell or continue to use without having to make any more payments.

Lower or No Down Payment

It often happens that a car lease may require a lower down payment than auto loans. This is particularly the case when financing your car through a bank. Dealers sometimes offer car leases that require down payment’s amounts as low as $1,000. This may prove to be a great deal particularly when it’s an expensive luxury car that you desire to buy. For a $40,000 vehicle, your bank may require 20% down, which works out to $8,000 in down payment alone. If you don’t have or don’t wish to put down such a big amount, a lease may prove to be the ideal solution.

How Often Do You Change Your Car

Ask yourself when you plan to get a new car. If you plan to get a new car every few years, leasing will probably be most suitable for you. But if you plan on using your car till the very end, it makes more sense for you to go for auto loans to buy it. Generally speaking, if your intention is to use a car for less than three years, a car lease will prove to be a more practical option than auto loans.

Renting or Owning?

When it comes to lease versus buying with auto loans, it really comes to a choice between ownership and rental. With a lease you are paying for the right to use the car. But with auto loans you can do as you please with the car for it is yours and yours alone. It’s very similar to renting a home. In rented homes you usually do not have the right to paint or carry out renovations to the house and you need to maintain it in a decent condition otherwise you may have to pay money at the time of moving out. But as the owner of a house, you are free to make whatever changes you fancy and it’s also your decision how to maintain it. The same principle applies to car leasing and car purchasing.

Consider the amount of miles you will be driving. Car leases will allow you to drive a given number of miles every year, with the average being about 10,000 to 15,000 miles per year. If you exceed the agreed number, you will be charged for every additional mileage that you use. This charge will need to be paid when the term of your lease ends. In case you plan to drive beyond the extent of mileage allowed by your lease, it would probably be a better option to buy the vehicle with an auto loan.

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