Buying Vs. Leasing
Car Loan Vs. Car Lease Benefits
Benefits Of Leasing A New Vehicle
Leasing a car, truck or van is simply another form of car financing. However, when a vehicle is leased, you are really just paying for the depreciation incurred on the vehicle over the lease term instead of paying for the entire car. Since you are only paying for your vehicle’s depreciation, your monthly payment will very likely be lower than when you purchase a car. With that in mind, you can likely afford a vehicle with more features or a higher trim level as compared to buying it outright. Since lease terms are short, typically around 36 months or less, you’ll get the enjoyment of driving a newer vehicle the life of your lease.
Options To Think About When Leasing A New Vehicle
Perhaps the most obvious and most substantial downside to leasing a vehicle is that you will not own your car at the end of the lease. You can think of this in terms of renting an apartment compared to paying a mortgage on your home. Another leasing factor to closely consider is the amount of driving you expect to do in your vehicle. That’s because when you lease, you’ll typically be subject to fairly stringent mileage limits. Going over those limits will add up quickly with many excess mileage fees costing between 15 and 30 cents per additional mile.
Benefits To Getting A Car Loan
The biggest benefit of purchasing a car with a car loan is that you will get ownership of the vehicle at the end of your loan. However, up until your final car loan payment is made, the bank or financial institution you borrowed the money from will own your car. A great reason to use a car loan as your financing option is that you have no mileage restrictions — it’s your vehicle to drive as much or as little as you would like. So, if you drive a lot of miles for work or travel, getting an auto loan will likely be your best option. Loan terms vary but can be structured with longer periods to make your monthly payment more affordable. When your car loan is done, you will have also built equity because even though your car’s value has depreciated, it’s still likely to hold some value as today’s vehicles are meant to last longer. This equity can be turned into cash for your next car when you use it as a trade-in.
Things To Consider About Car Loans
Just as auto leases have negatives, so do car loans. While you’ll own your vehicle at the end of the loan term, you will also generally have a larger monthly payment compared to a car lease. This is because your payment is based on a larger loan amount as well other variables such as interest rate, credit report, credit history and available annual percentage rates. Another out of pocket expense with a car loan is a larger down payment. Putting more money down on your vehicle will lower your payments since you will be borrowing less money from the bank, but doing so requires a bigger upfront cost.
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