Difference between financing or leasing a car!
Difference between financing or leasing a car!
Posted on July 20, 2023
Before you rev your engine, it's essential to consider your options for financing or leasing. While both options can get you behind the wheel of your dream car, there are some key differences to keep in mind. So buckle up and join us on a ride through the pros and cons of trying to finance or lease a car.
Financing a Vehicle
Financing involves taking a loan to purchase a car and paying it off over a specific period. When you take out a loan, you agree to repay the borrowed amount plus interest and fees. Shopping around and comparing loan interest rates is essential to saving money. In Canada, three types of lenders offer auto financing. To determine which option is best for you, we suggest consulting with one of our expert car sales representatives to guide you.
- 1. The traditional way to finance a vehicle is to borrow money from a financial institution or bank. To apply for a loan, you must fill out an application form and meet with a branch manager to discuss the loan. Bank agents evaluate various factors such as your income, savings, and credit score to determine whether or not to approve your loan request.
- 2. When applying for financing through a car dealership, you typically select the car you want and then arrange the funding.
- 3. Online auto financing is a simple and easy way to access car loans. This method allows car buyers to get pre-approved for financing before they even begin shopping for vehicles.
Benefits and Drawbacks of Financing
If you're looking to lease or finance a car, there are a few things to remember about financing. First, you'll enjoy the benefits of owning a car until you sell or trade. You can drive as much as you want; however, a higher mileage will impact the vehicle's value and may result in frequent repairs and maintenance. You'll have to pay for significant repairs while you can make any updates or changes. At the end of the loan, you'll no longer have to make payments. However, if you decide to pay off the loan early, you'll need to cater for any extra payoff payments.
When you finance a vehicle, you will be responsible for paying the cost of the car, as well as any interest and other fees associated with the loan. Unlike leasing, the cost of financing is not impacted by the number of kilometres you travel. However, it's important to note that the monthly car financing payments are typically higher than those for a car lease.
Leasing A Vehicle
Leasing a car is renting a vehicle for a specified period in exchange for payment. The dealership rents it to you for an agreed-upon amount during the contract period, typically 12 to 36 months. At the end of the lease, you have three options: renew the lease with a new car, buy the car for the residual cost, or return the vehicle and end the contract.
While leasing may not seem viable to purchase a car at first glance, it can be a good option depending on your needs and preferences. Ultimately, whether or not leasing is the right choice for you will depend on your profile, likes, and requirements.
Different Types Of Car Leases
Several car leases are available in Canada, and the one you choose will depend on your short- and long-term goals and your monthly budget. Here are some of the most common types:
- Standard rental leases
- Leasing to own
- Lease takeovers
- Leasing a used car
Benefits and Drawbacks of Leasing
Car leasing can be an excellent solution for those with immediate needs and a tight budget. Several advantages to leasing a vehicle include lower monthly payments and special offers. You may only have to pay a down payment up to the first month's lease if you have a good credit history. Leasing allows you to change vehicles quickly, saving you money on maintenance costs.
There are also some disadvantages to leasing that you should consider before making a decision. If you have a good credit history, leasing can be a great option as it often offers lower monthly payments than financing a car. However, if your credit history is not good, you may be unable to lease a vehicle. Also, leasing may not be the best option if you plan to drive a lot, as it typically comes with mileage restrictions.
Difference Between Leasing and Financing a Car?
|The major car finance and lease difference is the ownership. When you finance a car, you become the vehicle owner once you repay the loan. You can keep the car for as long as you want and sell it or trade it anytime.
|On the other hand, when you lease a car, you do not own it. You rent the car for a set period, typically 2-4 years. At the end of the lease term, you must get the car back to the dealership unless you choose to buy it.
|When you finance a car, you typically have higher monthly payments than leasing. This is because you are paying for the entire purchase price of the car over a set period, plus interest.
|On the other hand, leasing typically has lower monthly payments because you only pay for the car's depreciation during the lease term, plus interest and fees.
|Mileage and Wear and Tear
|When you finance a car, you can drive it as much as you want and modify it as you please. However, you are responsible for any wear and tear on the car, which may affect the car's resale value in the future.
|When you lease a car, you are typically limited to a certain number of kilometres per year, usually between 10,000-15,000. If you exceed the mileage limit, you must pay additional fees at the end of the lease term. Additionally, you are responsible for any excessive wear and tear on the car, which may also result in additional fees.
|The overall cost of financing a car may be higher than leasing due to higher monthly payments, interest rates, and depreciation. However, once you pay off the loan, you own the car and can continue to drive it without any additional payments.
|Leasing may be a more affordable option in the short term due to lower monthly payments, but you do not own the car and will have to return it at the end of the lease term. Additionally, any modifications or excessive wear and tear may incur additional fees.
|When financing a car, you can sell or trade it anytime. If you sell the car, you can use the money to pay off your pending loans. If you trade it in, the dealer will repay your loan and apply the remaining value to your new car purchase.
|When leasing a car, ending the lease early can be expensive. You may be responsible for paying the remaining lease payments, early termination fees and other charges. It's important to consider the lease terms and your plans before signing a lease agreement.
Which One Is Best For You?
It all comes down to your choice. It's always ideal to speak with the dealership and see their finance options. Make the decision only after you weigh the pros and cons for both.
When should you lease a car:
Leasing a car may be the right choice if you enjoy driving a new car every few years and prefer not to worry about selling or trading in your vehicle. With leasing, you are renting the car and paying for driving a new vehicle.
Leasing also typically comes with the benefit of having the car under warranty for the lease term, which can provide peace of mind and protect you from major mechanical issues. Additionally, if you want to pay less upfront, leasing often requires a lower down payment than financing a car, and monthly payments can be 30% to 50% lower.
When you’re lease term ends, you basically return the vehicle to the dealership, eliminating the need to sell or trade it in. Overall, leasing is the right choice if you enjoy driving new cars and want a hassle-free way.
When should you finance a car:
Financing a car may be the right choice if you want to own your vehicle but cannot pay for it all at once. With financing, you make monthly payments until the car is completely paid off; at this point, it becomes yours.
It's important to note that when financing a car, you will typically need to make a down payment of 10% to 15% of the car's value. However, this can be a more manageable option for many people than paying for the full car upfront.
Owning your car also allows you to drive it as much as you want without stress over mileage restrictions, which can be a limitation when leasing a vehicle. Additionally, you can personalize your car with custom license plates, upgrades, new tires, or other modifications.
Finally, owning your car allows you to choose any type of auto insurance that fits your needs. In contrast, people who lease often need comprehensive and collision insurance coverage. Financing is right if you want the freedom and flexibility of owning your car.
Apply For Easy Auto Financing at Car Canada Today
Car Canada is the top choice if you're looking for easy auto financing for used cars in Ottawa. With a wide selection of high-quality used cars and a commitment to working with customers of all credit scores, Car Canada makes it easy to get the car you want at a price you can afford.
Don't let a low credit score keep you from getting the car you need. Apply for auto financing at Car Canada today and take advantage of our flexible financing options and competitive rates. With our help on leasing or financing a car, you can drive away in the car of your dreams in no time. Visit us today and experience the Car Canada difference!