Key Takeaways
- There are three different ways you can acquire a car – buying a car upfront, financing a car over time or leasing a car over a lease term.
- Financing a car means purchasing a car with some cash paid upfront and the rest as a loan paid off over time.
- You don’t have to worry about mileage restrictions or wear and tear fees when financing a car. You can also resell and trade it in whenever you want.
- Monthly payments are higher when you finance a car, your vehicle options may get restricted, and covering maintenance is your responsibility.
- Leasing lets you drive a brand-new vehicle for 2-3 years with lower monthly fees.
- But there are mileage restrictions that you must consider when leasing a car.
- Since you don’t own the car, you’re not entirely responsible for its maintenance costs.
Getting a new car is one of the most exciting experiences for any driver. Deciding what car you want, what trim suits you best, and what features you’re looking for – the whole process is invigorating, and once you’ve chosen the car you want, you can’t wait to get your hands on it.
However, you should consider a few things before heading to the dealership. When acquiring a new car, you should decide whether to purchase, finance, or lease it. Each option has different advantages and disadvantages; some are less heavy on the pocket than others.
What does each option entail for your driving experience and expenses? Don’t worry; we’ve got you covered. We’ll guide you through the differences between leasing, financing, and purchasing while answering your queries about each option. Let’s get right into it.
Buying a Car
When you buy a car upfront, it means you pay for it in full in cash. The car becomes yours once you’ve purchased it, and that’s the end of the process. However, financing a car is another way to buy it.
Financing A Car
Financing means purchasing a car with a loan that you repay in increments. Via financing, you pay some cash upfront for the vehicle and then finance the remaining amount with a loan.
When you apply for a loan, you’ll get an interest rate based on your credit score, and when you pay each month, the payment goes towards both the principal and interest amounts until your loan term is finished.
Once the loan is fully paid off, you become the legal owner of your vehicle since you’ve essentially purchased it. Doing this gives you complete control of whatever you want to do with the car.
Advantages Of Financing A Car
Financing a car has several benefits, making it a great option for many drivers. Firstly, you don’t have a mileage limit when you finance a car. This means you can drive as many miles as possible without worrying about extra fees or limitations.
Similarly, you don’t have to worry about any wear and tear fees either – because when you finance a car, it is entirely yours. You don’t have to worry about extra charges if something happens to the car.
In addition, since financing a car is just another way to purchase it, you can resell or trade in your vehicle whenever you want to. And who knows – you might be able to use that cash as a down payment for your next vehicle!
Disadvantages Of Financing A Car
Unfortunately, financing a car has its drawbacks too. One thing you should consider before taking out a loan for your new car is the monthly payments – which are much higher than those of lease payments. Hence, if you’re on a tighter budget, you should consider leasing a car instead.
Additionally, since financing is more expensive than leasing, it limits the range of vehicles you can afford, so your options are restricted. Again, consider leasing instead if you’d prefer a wider array of vehicles.
Lastly, when you finance a car, it is under your ownership — which means you’re responsible for its maintenance. On the other hand, most maintenance costs are already covered when it comes to leasing. Therefore, ensure you’re prepared for high maintenance costs when planning to finance a car.
Leasing a Car
Leasing a car lets you drive a brand-new, untainted vehicle for a specific period (usually 2-3 years). To lease a car, you make an upfront payment to cover the new car’s fees and taxes, and then you pay a monthly fee during the lease term.
Though the lease term monthly fee is comparatively more affordable than financing, it has certain restrictions, like maximum mileage. On the other hand, leasing lets you drive a more expensive and comprehensive range of vehicles you may not be able to finance.
Once the lease period is over, you have two options: either you return the vehicle and lease a new one or purchase the leased car and take full ownership of it. However, remember that there is less negotiation when you buy a leased car than a car you normally purchase.
Advantages of Leasing A Car
Leasing is an excellent option for anyone who wants an affordable way to acquire a new vehicle. Since monthly payments are less hefty on your pocket, you can stay within your budget when leasing your car.
Another perk of leasing a car is the bumper-to-bumper warranty; you’re not answerable for most of the maintenance during the lease period. The warranty usually covers most of the cost if something goes wrong with your vehicle. Therefore, you won’t have to pay any maintenance costs during the lease period.
Last but not least – and arguably the best perk – leasing means you can drive a brand-new car every few years. And if you’re one of those drivers that love new rides with the latest technology, you should consider leasing a car.
Disadvantages of Leasing A Car
Leasing a car also has disadvantages you should consider before signing a lease agreement. Firstly, almost every lease agreement limits the number of miles you can drive the vehicle during the lease period.
These mileage limitations are usually around 10,000 to 15,000 miles per year, and if you exceed them, you will have to pay a fee when returning the car. So if you enjoy cruising aimlessly when you’re out for drives, leasing a car may not be the best option for you as it comes with considerable restrictions.
Similarly, when you return, your car dealer will inspect the leased car for wear and tear. If they find scratches, scrapes, tears, and so forth, you will be charged a penalty fee. To avoid this, you must keep your leased car in excellent condition.
Remember – when you’re driving a leased car, you don’t completely own it. Hence, you can’t build equity in the vehicle, and you must either return the car when the lease term is over or purchase it outright.
Also, the more you keep leasing cars, the more expensive they will get. When you hire cars consistently, you’re continuously renting vehicles for a few years, one after the other. At one point, you’ll spend more of your budget on leasing a car than you’d spend to purchase one.
Moreover, if you realize you can’t afford your lease payments after your lease term has begun, ending the lease before the term ends will cost you a hefty amount of money.
So, Should I Lease Or Finance A Car?
Both leasing and financing come with different benefits and drawbacks. When buying a new car, you should consider your requirements and limitations. If you’ve got a tight budget and would rather drive a nice, new vehicle than own it completely, leasing a car is your option.
If your budget is flexible and you’d rather have your car to exercise ownership over it, then you should go with financing instead. At the end of the day, your decision depends on personal requirements and restrictions.
If you’re still unsure of what option to go for, or if you’re confused regarding their respective processes, don’t worry. Our team of certified experts at Acura of Tempe can answer all your queries and guide you to the option best suited to your needs. You can also browse our vast inventory of new and pre-owned vehicles to see if anything matches your requirements.
So what are you waiting for? Visit our dealership at 7800 Autoplex Loop, Tempe, AZ, or check out our services and inventory on our website.
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