When you are planning to buy a car and don’t have the entire amount to pay, there are two options available before you. One is to lease the car and pay a monthly lease on it. The other is to take it through financing and repay the loan every month with interest. This article looks at the pros and cons of financing and leasing to help you make an informed choice while buying a vehicle:

1. Leasing
To understand all the differences between financing and leasing a vehicle, it is important to look at the pros and cons of each process.

The benefits of leasing are:

• Unlike car loans, the amount you pay to lease a car is much lesser. This makes monthly payments cheaper, allowing you to save money.
• You can take a lease for two years and change your car every two years and get the latest model if you wish.
• You have a warranty on the car that can protect you in the event of an accident. You don’t have to worry about your repair bills.
• You don’t need to worry about getting loan approval.

The cons of leasing are:

• You don’t own the car; it belongs to someone else. You cannot make any changes you want in the car nor can you include it as an asset belonging to you.
• There are driving limits imposed in terms of the number of miles driven. If this is exceeded, then you may need to pay more.
• You must take proper care of the car to prevent penalties while returning.
• If you take a long lease, then leasing works to be more expensive.

2. Financing
Pros of financing a vehicle are:

• You are the owner of the vehicle, even though the title is transferred after you repay the loan. You can make any changes you want in the car.
• The car belongs to you and you can sell it any time you want. If you find it difficult repaying the loan, you can sell the car and then use the amount to clear the loan.
• There are no limits in terms of mileage or car care. It is your car, and you can drive to any destination you wish.
• You can discount the depreciation so you can pay less when you buy a used vehicle.

The cons of financing a vehicle include:

• The monthly repayment of the loan is much more than leasing. This is because you are paying to own the car.
• If you do not select the financing agency properly, you can end up paying heavy interest on the loan.
• You cannot repay the loan early, as the lender will charge you a penalty for early closure.
• As the car becomes older, the cost of maintenance and repair increases, which is money you need to spend in addition to monthly loan repayments.

It is important to compare the pros and cons of financing and leasing before deciding which one you would like to opt for while buying your vehicle.