Financing VS Leasing: Leaving More in Your Pocket
April 05 2022,
Can I borrow $30,000?
Or perhaps more?
Whether you’re replacing an older vehicle that’s become unreliable, or getting a second vehicle for your kids to drive, the biggest question that comes up is how much we can spend.
Financing
Financing a vehicle is basically the same concept as having a mortgage. Rather than paying for the vehicle all at once, you pay it off in installments of monthly, bi-monthly, or weekly intervals. Usually, the cost of the vehicle will end up being slightly higher than if you would have paid upfront. This small increase is called the interest rate or annual percentage rate (APR). Normally speaking, a finance option can either be offered by the manufacturer’s finance company or a third party like a bank. Once paid off, the vehicle is yours to do anything with.
Leasing
Like financing, leasing involves paying a fee for your vehicle on a regular basis; be it monthly, bi-monthly, weekly, or bi-weekly. Leasing is when you pay the dealership for lending you the vehicle, like paying rent for an apartment. If you lease a vehicle, you will not own the vehicle once your payments are done. You do however have the option of buying out your vehicle once the leasing period has ended. The buy-out price will depend on the dealership, and it is an important topic to discuss with your dealer before you lease out a vehicle.
Leasing also often has a mileage limit, meaning you cannot drive over a certain number of kilometers in a year, typically 20,000 – 24,000 km. Exceeding the limit will invite excess charges by the dealer. The most appealing part of leasing is that it is usually significantly cheaper than financing and it can be less commitment than financing.
Which Is Best?
Which is better really depends on your lifestyle, particularly how much you’re going to be driving, what you can afford, and the level of commitment you want. If you drive a lot then leasing may be out of the question for you. If you can’t afford the payments of financing then leasing is the way to go.
Financing locks you into a long-term commitment of paying off a vehicle for 3-7 years while leasing only commits you to your payment for 1-3 years. If you don’t want to be in a long-term commitment to payments then leasing may be more appealing. But keep in mind that your financing payments go straight towards paying off your vehicle that you’ll be able to own at the end.
Are you stuck playing with the build-your-own vehicle on the main page? Not sure which option is best for you? Give us a call today and we can go through what your options will cost you. Connect with a salesperson today.
