When you head to the dealership to choose the new vehicle you’re going to bring home with you, there’s a good chance you’re going to see a variety of offers that you can take advantage of for both financing and leasing the vehicle you want to drive. Typically, owning your vehicle is what we’ve been taught makes the most sense, but there are pros and cons to financing a vehicle outright in order to make it the one that you own at the end of the loan that you sign. You might be better off with a lease, but first you need to consider the pros and cons of financing a car.
Customization –When you financed a car and have a loan for it, you have the freedom to customize your vehicle the way you want. When you lease the vehicle you can’t make changes to the vehicle because you don’t own it or own the rights to altering it. If you want to put special wheels or a lift kit on a truck or SUV, you’re going to want the financing option when you shop.
Selling the Vehicle –If you sign a loan agreement for the vehicle that you choose, you have the right to sell the car, even before the payments are completed. This is typically considered trading in the vehicle to the dealership you turn to for a new model to drive. When you lease, you would have to pay a penalty in order to get out of the lease and choose a new model.
Mileage –When you finance a vehicle you’ve chosen to drive you can drive it as many miles as you want without any penalty. This is preferable for most of us when driving. If you lease a vehicle you’ll have a limit to the number of miles you can drive each year and will have to pay a penalty for any miles over the agreed upon number that you drive in the vehicle.
Payments Will End –If you’re good at taking care of a car and know you’ll have it for longer than your loan term, it’s better for you to secure financing. Once you’ve made the last payment on a vehicle you will be able to enjoy driving without any payments going forward. When you lease a vehicle and the payments end, you have to turn the vehicle in at the dealership.
Repairs After Warranty –If you have a vehicle that you chose to finance you’ll have to factor in repair costs that could take place after the warranty period is over. Typically, a lease won’t have this as part of what you’ll experience because the lease most likely won’t end prior to the warranty expiring. You will need to factor in the possibility of paying for these repairs.
Higher Monthly Payments –The payments you make every month with financing will be more than with a lease. This is because you are paying a loan that has principle and interest with the result being ownership of a vehicle. With a lease, you’ll pay for the depreciation over the time of the vehicle.
Depreciation Costs –The old saying that a vehicle loses half its value when you drive it off the lot isn’t too far from the truth. Once you put a number of miles on the odometer, the vehicle you drive will drop in value, but your loan will stay the same. For this reason, you need to know the vehicle you choose is the one you want because trading it in early in your loan will likely cost you money.