Are you trying to get yourself a brand-new car? Now that’s a huge decision you have to make. After all, they’re expensive. That being said, for most people, owning a car is a result of two options: leasing and financing.
Let’s talk about what those two options are and what pros and cons you can expect:
What Is Leasing?
Leasing a car is an alternative to buying a car. When you lease a car, you make monthly payments to the leasing company, and at the end of the lease, you can either purchase the car or return it to the leasing company.
What Are the Pros and Cons of Leasing a Car?
1. Lower Monthly Payments
When you lease a car, you are only paying for the depreciation of the vehicle during the lease term. This can result in much lower monthly payments than if you were to finance a car purchase.
2. No Need to Worry about Selling the Car
At the end of a lease, you simply return the car to the dealership. This can be a great option if you’re not sure what you want to do with your car at the end of the lease term.
3. More Flexibility
With a lease, you have the option to trade in your car for a new one after the lease term is up. This can be a great way to get a new car every few years without having to worry about selling your old one.
1. Limited Mileage
Most leases come with a mileage limit, typically between 10,000 and 15,000 miles per year. If you exceed this limit, you will be charged additional fees.
2. Limited Customization Options
You may be limited in the types of modifications or aftermarket additions you can make to a leased car. This is because you will not own the car at the end of the lease.
3. Early Termination Fees
If you need to end your lease early, you may be charged an early termination fee.
What Is Financing?
When you finance a car, you’re essentially taking out a loan to pay for the vehicle. The loan is typically paid back in monthly installments over a set period of time, and the interest rate you’ll pay will be determined by a number of factors, including your credit score.
What Are the Pros and Cons of Financing a Car?
1. Lower Interest Rate
When you finance a car, you may be able to get a lower interest rate than if you were to lease or pay cash. This can save you money in the long run.
2. Build Equity
When you finance a car, you are building equity in the vehicle. This can be beneficial if you ever need to sell the car or trade it in.
3. Tailor Your Payments
When you finance a car, you can tailor your payments to fit your budget. This can be helpful if you have other financial obligations.
1. You May Have a Higher Monthly Payment
When you finance a car, you may have a higher monthly payment than if you were to lease or pay cash. This can be a burden if you are on a tight budget.
2. You May Be Upside Down on Your Loan
If you finance a car, you may end up owing more on the loan than the car is worth. This can be a problem if you need to sell the car or trade it in.
3. You May Have to Get a Cosigner
If you have bad credit, you may need to get a cosigner to finance a car. This can be a burden if you are trying to finance a car on your own.
Which route you take is up to you and depends on what your needs are. If you’re looking for an option to simply rent a car for a long time, leasing may work for you. However, if you’re looking to finally own the car after some time, financing is a great option. Just be sure to talk with auto dealers and see what your options are to understand what’s the best route to take!
LeaseAxel allows individuals the option to lease cars and other vehicles from Canada’s auto dealers. If you are looking for auto leasing in Toronto, reach out to us today!