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Financing or Leasing a Car: What’s Right For You?

Posted in auto industry, Car Buying, Cars, Guide, Tips by Vito Rispo | September 12th, 2008 | Leave a Reply |

It’s much harder to lease a vehicle these days. The price of used cars has dropped dramatically in recent months, and there are some pretty extreme credit-market pressures, so leasing just isn’t that economical for automakers right now. Your credit has to be near perfect, that is, if you can even get a lease at all (GM and Chrysler don’t offer them now).

Nevertheless, the lease is still an option for most car makes. So if you’re looking for a new car, you have to ask yourself what to go for, the finance deal or the lease?

First you have to consider the differences. With financing, you’re eventually buying the car. You can think of financing as a car mortgage, when it’s all paid off, you own it. Leasing, on the other hand, is like renting; you’re just paying to use the car for a period of time. At the end of that time period, you return the car to the dealership. The benefit of leasing is that it’s generally cheaper than financing, and you usually don’t need a down payment, so you can drive a nice car that you otherwise wouldn’t be able to afford.

The catch is, you can’t customize the car if you’re leasing, since it still technically belongs to the dealership. And you’re limited to a certain number of miles per year, generally around 15,000, and you have to pay a fine if you go over that number.

Financing is a different story. When you finance, you can add a wacky spoiler or tint out the windows or add a turbocharger and a nitrous system. You can do whatever you want with the car, because you own it, not the dealership. However, you’ll have to leave a down payment or a trade in car, and the monthly payments will be higher than they would if you were leasing a car of similar value.

The desicion is obvious to some people, go with financing since you eventually own the car, right? I’m not so certain. A car is not an investment, and you should never think of it as such. A car is like a computer, it’s going to decrease in value, a lot. You know that and you really should just be looking for the package you’re going to enjoy most and get the most use out of.
It’s really a personal choice, but here is a quick little guide:

You may want to LEASE if you like driving a new car every few years, you want lower monthly payments, you always want a car that’s under warranty, you drive an average number of miles, and you properly maintain your cars.

On the other hand, you should consider FINANCING if you like the idea of owning your car, you don’t mind the higher monthly payments, you want to build up a trade-in value, you drive more than average miles, you want to drive the same car for years to spread out the cost, you like to customize your cars, and don’t like the risk of possible lease-end charges.

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