Selecting a new or new-to-you car can be an exciting time. A little less exciting is deciding how to pay for your vehicle purchase. Unless you have the cash to pay outright, you will likely have to choose between financing or leasing your car. Both financing and leasing get you the vehicle you want from a dealer. Both options can help you build your credit. But there are some key differences between financing and leasing, including what you do with the car when the payments end. If you’re looking for a new vehicle in Western KY, Central KY, and Southern Indiana, Field and Main Can help you determine the best option for purchasing your new vehicle.
What Does Leasing A Car Mean?
Leasing a car is like renting–you pay a fixed monthly fee for a certain period (usually 36-48 months) to use the vehicle. You must follow the lease terms, such as limitations on mileage, your responsibility for maintenance, and more. Reviewing the leasing agreement carefully to ensure you’re comfortable with all the terms before signing is important. The lease contract will usually also include a buyout price, giving you the option to buy the vehicle at the end of your lease period for a predetermined amount.
What are the benefits of leasing a car?
Is leasing a vehicle the right option for you? Let’s look at the potential benefits.
- Lease payments are typically lower than if you take out a car loan to buy a car. This is because you’re not paying for the entire vehicle, just the value you use up for the time you’re driving it
- Normal wear and tear is covered, but you are responsible for maintenance/repairs in excess of normal limits.
- If you continuously lease your vehicle, you will always have a newer model car.
- You can lease a more expensive car than you could afford to purchase.
- You may be entitled to a tax break if you lease a vehicle for business purposes.
What are the cons of leasing a vehicle?
However, understand the potential downsides before you make a decision.
- You make monthly payments but don’t own the vehicle. If you continuously lease, you will always have a car payment but never own the car.
- You may have to pay extra, unexpected charges for going over the mileage limit or causing excessive wear and tear on the vehicle.
- You end up paying more because you’re using the car during the time its value most rapidly depreciates.
- It can be difficult to get out of a lease or modify your agreement if your financial situation changes and you find you no longer want or can afford the car payments. Early termination fees may apply.
- More strict credit requirements on leasing vs. financing.
When Leasing A Car Might Be Best
Ultimately, leasing can be a great option for your next vehicle if you’re unable to meet down payment requirements for auto loans or if you value consistently driving a new vehicle over ownership.
What does financing a car mean?
When you finance a car, you’re purchasing the vehicle outright with a car loan. You may have to put a certain amount down and then the rest of the purchase price is covered by the loan. You make a fixed monthly payment on the loan for a pre-determined period or until it’s paid off.
When it comes to getting a car loan, you can usually get financing from the dealer or from a bank like Field and Main. Once the loan is paid off, you own the vehicle outright without having a payment. Auto loans can be used to finance new or used cars.
What are the benefits of financing vs. leasing a vehicle?
Is financing your next car purchase the right option for you? Here are the benefits:
- You own the car after the loan is paid off.
- You can sell or trade in the vehicle if it no longer meets your needs.
- You can make any customizations or modifications to the vehicle.
- You’re not subject to mileage restrictions, so drive as much as you want or need to.
- You can shop around for an auto loan and get pre-approved before you go to the dealer.
- You can also purchase a used or certified pre-owned vehicle, which can be cheaper than a brand-new model. Most leases are for new vehicles.
- If you need to modify your loan, you can always refinance.
- Because auto loans are secured by the vehicle’s value, they offer lower interest rates (subject to credit approval) than unsecured types of credit.
What are the cons of financing vs. leasing?
It’s always good to understand the potential downsides before making a decision.
- Monthly payments on a car loan may be higher than with a lease. With an auto loan, you’re paying off the entire purchase price of the vehicle plus interest taxes, and potentially other finance charges and fees. Unlike leasing, you’re paying for the entire vehicle, not just the time you use the vehicle.
- If you default on your auto loan, your vehicle can be repossessed, and your credit will be negatively affected.
When Financing A Vehicle Might Be Best
Financing a vehicle is a short-term solution (usually 3-5 years) to establish equity in a vehicle that you can hopefully use for many years after it’s been paid off. Financing can be a great option if you don’t have enough cash on hand to buy a vehicle outright.
Talk to us about your auto loan!
If you’re looking to finance a vehicle purchase from a dealership or private party, Field and Main can help! Our auto loans offer competitive interest rates, flexible loan terms, and easy payment tools. Talk to us about financing for a new or used car, SUV, truck, motorcycle, and more. Get pre-approved for an auto loan so you know how much you can spend before you visit the dealership. Our quick turnaround time gets you back on the road as soon as possible!
When you apply for a vehicle loan with Field & Main, you get the money you need for your car or recreational vehicle in 24 hours or less. Questions about vehicle loans? Contact us or visit one of our six convenient locations in Western Kentucky, Central Kentucky, or Southern Indiana to talk with a lender. Field and Main is here to guide all your financial needs today, tomorrow, and wherever you are!
