Not sure whether to finance or lease a car? Find out more about each one, and decide from there.
Having a car is one of the fun parts of being an adult: getting reliable transport to work, a means to take fun road trips and the convenience of getting around in your own time. There are a few options when it comes to car ownership, with the two popular being car leasing, and buying the vehicle through financing.
While leasing is newer than the traditional ownership options, it has quickly risen in popularity. Drivers wanting more flexibility gravitate towards leasing as it offers the option to drive a new car every few years. Leases are short-term rentals up to a maximum of three years, and typically the cost of rental also includes services. When compared to buying, the monthly payments on a leased car tend to be lower. An important factor to keep in mind is that companies that lease cars are very strict about the number of kilometres the car can be driven, with stiff financial penalties for any distance over the agreed amount.
If you feel it is important to own a car then financing is more suitable for you. This option allows for a deposit payment, monthly instalments and at the end of the finance agreement the driver takes ownership of the car. Some institutions require a balloon payment at the end before transfer.
As the driver will be the eventual owner there are no restrictions on how far the car can be driven. This also means that the driver is responsible for all vehicle maintenance and services for the entire time the car is in their possession. The finance term can be up to six years and is not easy to end the agreement ahead of time without paying dearly. Another major drawback of buying a car is that the value always depreciates.
In the end the decision about whether to finance or lease will come down to where you are in your life at that point. Someone wanting the flexibility of driving a new car every few years to keep up with life changes should consider leasing.
If you prefer the certainty of knowing that the car will belong to you outright in the end then financing a car for a specific time frame is probably a better choice. Either way, consider all options carefully in order to ensure years of stress-free driving in future.
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