When it’s time to invest in a new vehicle, you’ll have to decide how you want to pay for it. Unless you plan on paying cash upfront for the full price of the vehicle, you’ll be looking at either financing or leasing your new vehicle.
Both financing and leasing have their distinct benefits and features, and when you decide what’s right for you, you’ll have several factors to consider. Here is a brief overview of the features and benefits of both financing and leasing, that will hopefully give you some insight as to what is the right option for you.
When you lease a car, you do not own the vehicle, instead you pay to use the vehicle for a fixed period of time, with a fixed number of kilometers of use. When your lease term is over, you have the option of either buying the car outright, or returning it to walk away.
When you finance a vehicle with a loan, you own the vehicle, and can do whatever you’d like with it. You can add any customizations, and drive it as much as you’d like. With a loan, you’ll make monthly payments that slowly pay off the entire vehicle cost at a certain rate of interest depending on your financing terms. When you finish paying off the loan, you completely own the vehicle.
UPFRONT COSTS AND DOWN PAYMENTS
With a lease, the upfront fees usually include the first month’s payment, a fully refundable security deposit, taxes, registration fees, a down payment and possibly other fees.
When you finance a car with a loan the upfront fees are usually a down payment, taxes, registration fees and other possible fees.
The monthly payments you’ll make in a lease are almost always less than in a loan. The main difference between lease payments and loan payments are that with a lease you are only paying for the depreciation of the vehicle during the time of lease, plus interest, taxes, rent charges and other possible fees.
Monthly loan payments are usually higher than lease payments because you are paying off the entire price of the vehicle, plus interest, taxes, and possibly other fees associated with your loan.
When you lease a vehicle it is highly recommended that you plan on staying in the lease for the entire duration of the term. It is possible to end a lease early, but you will generally have to pay an Early Termination fee that can sometimes cost just as much as the remaining balance of the lease payments.
When you finance a vehicle, since you own it, if you decide to get rid of the vehicle you can sell it or trade it at any time. If you want to sell your vehicle before you’ve fully paid off your loan, you can use the profits made from selling the vehicle to pay off the remaining balance owed on the loan.
At the end of your lease term, you will have the option to either purchase the vehicle, or return the vehicle to the dealership to walk away after paying any end of lease fees.
Since you own the vehicle, you will not be required to return the vehicle. As the owner of the vehicle, you’ll be responsible for selling or trading the vehicle if you wish to get rid of it.
When you lease, the future value of the vehicle does not affect you. You also won’t gain any equity on the vehicle as you’ll be returning it at the completion of your lease term.
As the owner of the vehicle, its depreciation will affect the resale value. But, you will gain equity as you own the car, because it is yours to keep.
When structuring the terms of your lease, you will have to consider how much you plan on driving the vehicle. You will decide on a specific number of kilometers that you’ll put on the car during your lease which will act as a limit as to how far you can drive it. If you go over the distance limit, you’ll be charged overage fees.
There are limits on how far you can drive your car when you finance it with a loan, because you own it and can drive it as much as you want. Still, you should consider how many kilometers you put on your car as it will affect the value of the vehicle if you ever choose to sell or trade it.
WEAR AND TEAR
If your car endures any damage or excessive wear and tear during your lease term, you will be responsible for any repairs and the costs involved.
When you finance your car, the wear and tear on your vehicle will affect its value. While you won’t be charged any extra fees for damaging your car, but you will be responsible for any repairs that need to be done to make sure it’s safe for the road.
When you lease a car, you will be required to restore the vehicle back to its original state or to its optimum condition for resale. If any customizations have been made, you’ll be required to cover any costs involved in removing them, or for any damage that the it caused.
As the owner of the vehicle, you are free to customize your car as you please. When making customizations to your vehicle, consider how they will affect the vehicles value if you ever choose to sell it.
WHICH IS RIGHT FOR ME?
When deciding whether to lease or finance your new Honda, consider all the factors involved and the benefits and features of both leasing and financing. It really comes down to personal preference and what your intentions with your vehicle are.
If you have any questions about the pros and cons of either leasing and financing, a member of our finance team would be happy to sit down and have a conversation with you. Whether you want to lease or finance a your new car, we will help you through every step of the process here at Orangeville Honda.