Should You Lease or Finance Your New Car?
Should you lease or finance your new car? Most people have this question in their mind when getting a new car. Well, there is no one definite answer. Therefore, you must look at different factors before making this decision, as both of the options come with distinct advantages. If you aren’t sure whether you should lease or finance your new car, don’t worry! We will discuss five key factors you must consider to make a sound decision. First, let’s take a look at how they differ.
When you are leasing a car, you do not have to deal with selling and purchasing the car. All you need to do is pay a small down payment, often followed by a certain number of monthly payments. These payments continue until the lease ends. However, you do not own the car, which means that you incur the expense of car usage rather than acquiring an asset.
On the other hand, car finance allows you to build an equity as each monthly payment that you make includes part equity and part interest. Once you complete your instalments, the car becomes your asset and you can sell it, gift it, or retain it. If you pay a higher down payment, you may have to pay less amount of interest, which will save you more money.
Lease or Finance: Things to consider
When you are financing a car, you need to pay a higher amount of monthly payment as you pay the whole vehicle cost unlike leasing a car, which only requires a payment for depreciation of the vehicle. If you believe that you may experience difficulty in affording the monthly payment for financing a car, you should opt for the leasing option.
Similar to the previous point, lease agreements usually require a lower amount of down payments, and in some cases, the dealer waives the complete amount of down payment. On the contrary, financing a car may require approximately 20% of upfront payment. Therefore, if you do not have the money for an upfront downpayment, leasing will prove to be a viable choice.
The usage of the car also plays an important role in deciding whether you should finance or lease your new car. If you believe that you will frequently use your car, perhaps drive over 24k to 32k kilometres, then you may have to pay extra for each kilometre, depending upon the agreement you signed with your lease provider. However, you do not have to worry about limiting your car usage when financing your new car. For instance, you can drive 80,000 kilometres per month without paying an extra dime. According to Statistics Canada, a new record has been set for sales of the new car in Canada this February.
A car is always prone to scratches or damage when on the road. However, if you believe that the probability of damage to your car is high, due to any potential hazards, then you’ll be better off financing your car. The reason is that if you are leasing a car, you may need to pay wear-and-tear fees if your car is damaged, according to your agreement.
Long-term vs Short-term
Perhaps the biggest factor which you may consider when deciding whether you should lease or finance a car is whether you are looking for a temporary driving solution or looking for a vehicle to commute long-term. If the former is true in your case, opt for leasing as it will be a cost-effective option. On the contrary, if you are looking for a long-term solution, you may be better off with financing a car.
These are few of the main key aspects that you need to consider when deciding whether you should lease or finance your car. There are many online calculators available on the internet, which will allow you to calculate the cost pertaining to both options. However, your decision must not be based solely on financial terms, but also consider other factors such as lifestyle, customization requirements, future value, and factors stated above. In the end, it comes down to your driving requirements and budget. If you have decided to finance a car, here are the 5 things you must consider!
Barrhaven Honda is a new and used car dealer, carrying the number-one-selling car in Canada. We provide great vehicles and services to our customers. If you are looking for a new car, contact us now!