Raising Funds for New Wheels: to Lease or Not to Lease is the Question


When it comes to buying a car, many people feel overwhelmed. And quite understandably so, since the process involves great deal of price negotiations, decision making and so on. Most important is answering the question: should you lease or should you acquire a loan to fund the car? In this guide, we will see the pros and cons of both, buying and leasing. However, before we delve into the technicalities of these processes, let us take a quick look at the trends in car financing today.

Trends in Car financing

Up until the recent past, people would not dream of leasing, ever. The term ‘leasing’ was, simply put, highly confusing. Leasing a vehicle usually meant that an individual was unable to afford it, or that he was given the vehicle on loan by his employer with monthly expense deduction from his salary. However, all this has changed. Today leasing does not come with the associated social stigma it once did.

Now that the basics have been cleared, let us study the pros and cons of either process.

Leasing: Types, advantages and disadvantages

Leasing allows you to use a car for a limited time period, at the end of which, you do not own the vehicle. Leases for automobiles are of two types: financial lease (wherein a residual value is preset) and a novated lease. In the former, should you choose to buy the car at the end of the lease period, dealers consider the residual value to set the price. A novated lease is generally used by businesses where an employee may use a vehicle leased by the company on his behalf for a set period. The responsibility of paying the rent lies in the employees’ hands; should s/he quit the company, the vehicle may be retained by him with all legal responsibilities now being handed over to him/her by his employers.

Naturally, the benefits of leasing include tax benefits, ability to preserve one’s cash flow, increased flexibility in type of vehicles one drives as well as maintenance benefits.

On the down side, leasing does not grant you ownership so you cannot modify the vehicle and must return/buy it at the end of the agreed period. There are many Ford Lease deals NJ which can explain the car leasing process in a simplified manner.

Loans: Types, Advantages and disadvantages

A car loan helps you fund the purchase of a car and naturally, unlike leases, you need to pay the full amount of the vehicle to the seller. Car loan funds can also be of different types like variable rate or fixed rate of interest, secured or non secured loan and also variations based on the period of the loan along with other terms and conditions. Naturally, the biggest advantage of using this method to finance the vehicle is that you can claim ownership of it and do as you please with the vehicle. On the downside, you need to shell out more money than you would in lease (and the fact that the lender can demand full payment at any time.)

Conclusion: Which option should you choose?

Naturally, the decision of buying or choosing vastly depends on one’s personal circumstances. Cars are also hobbies for some drivers; many want to try bigger, better and faster models as and when they are released. Naturally, for such people, leasing is a better choice. On the other hand, some drivers tend to be a bit hard on their vehicles. For them, buying is the better choice, since leasing requires one to return the car in mint condition.

Thus, the decision to buy or lease depends on individual objectives and current financial situation. In either case, it helps to be educated and well informed about both these financing options for vehicles. This can help you get much needed confidence when you step into a dealer’s showroom. For more information on buying versus leasing a car, click here.



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