What Is the Difference between Leasing and Financing a Car?

what is the difference between leasing and financing a car

Basically, there are two options you have whenever you are short on money but you are in need for a car. You can choose between leasing and financing. These two terms are often misinterpreted as the same thing. If you take a look at the surface, they are similar, indeed. Both offer you with the option to get a car by spending less money within monthly payments. But, without any doubt, there are some different things that you need to pay attention to before you decide whether you are going to lease or finance a car. So, what is the difference between leasing and financing a car? Here’s the explanation.

  • Ownership

When you finance a car, you must agree to the monthly payments method along with the interest rate. You need to obey it. However, the ownership of the car still belongs to the dealer until you can finish all of the payments. In the end, the car is yours. This is surely different if you choose to lease the car. There will be monthly payments too. However, unlike when you finance a car, the ownership of the car still belongs to the dealer. It’s just like you rent the car. And surely, the amount of money you spend monthly for the lease is smaller than if you finance it. There may also be some option for you to purchase the car in the end of the leasing period. But, if you calculate it, the amount of money will be bigger if you lease and then purchase the car compared to if you finance it to begin with. So, by knowing this fact, you should think again whether you want to lease or to finance because ultimately, the outcome can be different especially when it comes to the ownership.

  • Affordability

This topic has actually been mentioned before. It is true that you will need to spend more money monthly when you finance the car. It’s because the price of the car is broken down in monthly payments along with some other extra costs including the interest. You should calculate how much money you will need to spend each month. Do you have it? If you do and you are willing to cope with such payment, then you should go for it. It’s like an investment because later on you will own the car. But, if you are really tight on budget, you can go for leasing. Without any doubt, this method will cost you less money. But, like what has been stated above, it’s only like you are renting a car each month. Unless you intend to own the car, you can go with this method.

  • Warranty

For this topic, leasing a car has more benefit because the car is still going to be protected by the warranty. Why is it like that? Normally, a new car gets 3 year warranty from the manufacturer. And that duration is more or less like the duration of the leasing. As for financing a car, the maintenance cost is your responsibility. Please consider that as the time goes, the amount of the maintenance cost is going to be higher too.

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