Hot Hyundai Topic: Financing Vs. Leasing Your Car
- Leasing is effectively renting a ride for a set period.
- You’ll need to keep the car in good condition if you lease, as you’ll be charged for any significant damages at the end of the lease.
- Financing is taking out a loan to pay for a car.
- Once you’ve made all the payments on a financed car, you own it outright.
- Whether leasing or financing is the best option for you depends on your circumstances.
Is it better to finance or lease a car? That seems to be a question on the minds of many car buyers. And, admittedly, there’s no simple answer. It depends on your unique circumstances and requirements. But that’s why we’re here: to help you make the best decision for you!
So, in this post, Lakeland Hyundai will break down the pros and cons of financing and leasing so you can decide easily.
Car Financing – All the Basics You Need to Know!
All right, let’s start with financing. When you finance a car, you essentially take out a loan to pay for the vehicle in full. The loan is then paid back over time, along with interest. Financing is often the best option for people who want to keep their car long-term or don’t want to be bound to strict mileage limits. According to car loan statistics, 85% of new vehicles hitting the road in 2019 were financed with a lease or a loan.
The financing process is usually pretty simple – you find the car you want, get approved for a loan, and make monthly payments until the loan is paid off.
Advantages of Financing a Car
So, what are the advantages of financing a car?
1. You Own the Car at the End
The main advantage of financing a car is that you ultimately own the vehicle. Once you’ve paid off the loan completely, the car is yours, and you can do with it as you please – modify it, sell it, trade it in, or keep it until it falls apart.
2. You May Get a Lower Interest Rate
If you’ve got excellent credit, you may be able to get a lower interest rate when you finance a car. A lower interest rate means you will pay less in interest over the life of the loan, and your monthly payments will be lower.
3. You May Be Able to Negotiate a Lower Sales Price
When you finance a ride, the dealership will usually give you a lower sales price than if you were leasing because they know they’ll make money back – and then some – through the interest on your loan. So, financing may be the route to take if you want the best deal possible on a car.
Disadvantages of Financing a Car
So, financing a car has a few advantages. But it’s not all good news – there are also a few disadvantages to financing a car.
1. You Have to Make a Down Payment
One of the biggest cons of financing a car is that you typically have to make a down payment. The down payment size will differ depending on the dealership and the lender, but it can be several thousand dollars. If you don’t have the hard cash on hand to make a down payment, you may have to finance it – which means you’ll end up paying interest on the down payment and the rest of the loan.
2. You’re Stuck with the Car for the Entire Loan Term
Another downside of financing a car is that you’re stuck with the car for the entire loan term – typically four or five years. This can be a problem if you need to trade in the car before the loan is up or if you can’t make the payments and need to sell the car. You may have to pay more than the car is worth to get out of the loan.
3. You Have to Pay Interest on the Loan
Of course, paying interest on the loan is one of the biggest disadvantages of financing a car. The interest rate will differ depending on your credit history and the dealership, but it can be quite high – as much as 20% APR or more. This means that if you’re financing a $20,000 car, you could end up paying an extra $4,000 in interest over the span of the loan.
Car Leasing – All You Need to Know!
All right, now let’s move on and talk about leasing a car. Car leasing is a very popular option, especially for people who don’t have the cash to buy a car outright or who want to avoid taking out a loan.
Car leasing is when you rent a car for a set period – usually 2-4 years. You make monthly payments on the car, and at the end of the lease, you return the car to the dealership.
Do you want a new car but don’t know if you really need one? Here are some telltale signs!
Advantages of Car Leasing
A few advantages of leasing a car make it a popular option.
- You can drive a nicer car than you could afford to buy outright.
- You don’t have to worry about auto maintenance or repairs. The lease agreement generally covers these.
- Leasing is often cheaper than financing a car, as you’re only paying for the depreciation of the car during the time that you’re leasing it.
- You can get out of a lease early if your circumstances change and you can no longer afford the payments.
Disadvantages of Car Leasing
Of course, you should be aware of some disadvantages to leasing a car before deciding.
- You never own the car, so you’re effectively paying to use it for a set time.
- There are usually mileage restrictions with a lease, so you’ll have to pay penalties if you exceed the agreed number of miles.
- You’ll need to keep the car in good condition, as you’ll be charged for any damage at the end of the lease.
So, Which Is the Ideal Route for You?
Whether leasing or financing is the best option depends on your circumstances. If you like to have the latest and greatest car every few years, then leasing could be a good option.
Financing is the way to go if you’re looking for a long-term relationship with a car. With leasing, you’re effectively just renting the car for a set period. With financing, you own the car outright once you’ve made all the payments.
Here’s How Lakeland Hyundai Can Help!
If you’re unsure which alternative is best for you, our Lakeland Hyundai team serving Bartow, FL, can help. We’ll review your budget & needs to help you make the best decision for your situation. Our staff in the finance department has years of experience and can get you the best terms possible.