Lease a Car or Finance a Car – Which is Better?


If you’re considering buying a new car, you may be considering going through a leasing company or financing provider.

While car financing is the ordinary method used to obtain a new car, in recent years leasing has become a much more attractive option for many.

What is leasing?

In recent years, leasing has become a popular and attractive option for individuals and businesses. Leases basically involve renting a car for a certain period ranging from 1 to 5 years, while paying monthly installments.

When the agreed time expires, you return the car.

The main forms of rental contracts for individuals in this case are contract rental and personal contract rental.

What is a rental contract?

This is the most common system of vehicle leasing where individuals get a new car for a certain period while making fixed monthly payments.

Once the contract expires, you have nothing more to pay (other than possible penalties) and return the car. Rental contracts come with certain conditions, such as a mileage limit.

What is car financing?

Car financing is an alternative way to buy a car. It has similarities to rental contracts, such as making monthly payments for a fixed term.

The biggest difference between car finance offers and leases is that when the contract expires, you are either the absolute owner of the car or you have the option of owning it.

For individuals, there are two forms of financing: hire-purchase and purchase contract

What is a hire purchase?

Hire-purchase is the most familiar type of financing where you make monthly payments for a fixed period (up to a maximum of 5 years) and once the contract expires you don’t have to pay anything AND own the car.

Hire-purchase agreements do not include conditions such as mileage limits.

What is a purchase contract?

Contractual purchase agreements are very similar to HP agreements, but they differ in what happens after the period ends.

in Contract Purchase, you have 3 options:

  1. Return the car without any additional payment. This has mileage restrictions
  2. Buy the car at the end for a pre-agreed amount, and
  3. Swap the car and put the product in a new car.

What are the advantages and disadvantages of leasing?

With the many benefits of renting, it’s no wonder it’s so popular. Here are some of the advantages of renting:

  • You can have a new car every few years without having to sell your current car.
  • Returning the car at the end of the lease means you don’t have to worry about the hassle of reselling the car
  • Another benefit of not having to resell your car means that depreciation doesn’t have to be an issue.
  • Leasing a car can often be a cheaper option than financing

There are a few drawbacks:

  • You never own the car
  • There are certain restrictions, such as mileage, and certain conditions
  • They can be hard to get out early

What are the pros and cons of financing a car?

Let’s compare the pros and cons of leasing versus financing. Here are some advantages to financing;

  • You own the car in the end
  • The contract is more flexible with different end results to choose from, which is great if you can’t decide
  • Ideal for those who want a new car for themselves while using a bank loan

As always, there are a few downsides:

  • You don’t get the chance to buy a new car every few years
  • this may be a more expensive option.

What is better; Lease or Financing?

The answer to this question will ultimately depend on your situation and what you want in terms of a new car.

If you’re interested in getting a new car every few years, without depreciation of your car being an issue, and with low monthly payments, leasing is the choice for you.

However, if you are more inclined to own your car at the end of your contract without any restrictions, but cannot afford to buy the car immediately, then financing is clearly the option for you.

There is no conclusive answer when it comes to whether leasing or financing is better. They are suitable for different people in different circumstances.

The best idea is to talk to the experts at Lease Loco before deciding which option is right for you!

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