Leasing or Financing – What’s the Difference?
Leasing or Financing – What’s the Difference?
Posted on January 29, 2020
When searching for a new car, you will come across a couple of payment options. Two of the most common options are financing your purchase or leasing your vehicle. If you are confused about the differences and which is best for you, Nexcar Auto Sales & Leasing can help. The main difference between the two is what your payments cover and your obligations. We’ll go over each in more detail below.
Car Ownership
When leasing a car, you are basically agreeing to a long term rental. You won’t own the vehicle. Instead, it must be either be returned or purchased outright at the end of your term. When financing a car, you own the vehicle and can do with it what you please. It can be modified, sold, or even parked in a garage indefinitely.
Car Down Payment
With a lease, the down payment will consist of a security deposit, taxes, the first month’s payment, a down payment, and registration fees. A financed car will include taxes, a down payment, the cash price, taxes, and perhaps other fees.
Monthly Car Payments
Leased cars will have lower monthly payments that cover the cost of depreciation, interest, fees and other taxes. Car payments that are financed will have a higher rate since the whole car value is included.
Auto Customization
Leased vehicles typically can’t be customized, or if they are, the changes will have to be removed at the end of the lease term. If there is damage caused by customization, there are damage fees that will have to be paid as a result. For financed vehicles, owners may alter or paint the car as they choose. Depending on the changes, the value of the car may decrease.
Depreciation, Wear & Tear
With a leased vehicle, the decreasing future value of the car has no effect on you, but you also don’t retain any equity from the value of the car. Any excessive wear and tear, including damage, will incur a fee. Financed cars will depreciate, as usual, however you are able to retain the equity. Wear and tear incurred by a financed car will be the responsibility of the owner. The owner will also be responsible for any repairs that are needed.
Mileage Restrictions
When you lease a car, there will be a set annual number of miles you are allowed to use. If you go over the allocated miles, there are extra fees that must be paid. Financed vehicles can be driven without limits, but keep in mind that the more miles that are on a car, the lower its resale value will become.
Returns & Early Termination
Leased cars that are returned early will incur a fee that is usually equal to the remaining lease terms. Those returned at the end of the term will only incur any leftover fees due. Financed cars can be traded or sold at any time so long as the loan is paid off before or at the time of sale.
How We Can Help
Leasing or financing a vehicle both offer different advantages. Your long term priorities will determine which option is best for you and your family. If you’re still unsure of which option is best for you, or if you’re interested in leasing or financing a new car, the experts at Nexcar Auto Sales & Leasing are here to help.
Give us a call at (416) 633-8188 today for more information on our rates and services.