Key Takeaways:
1. When you lease an automobile, you're essentially borrowing it from the dealership for a set period.
2. When you go for car financing, you take out a loan to cover the cost of the vehicle.
3. You can also finance your car through a dealer by taking out an auto loan from them or using a home equity line of credit.
4. Speaking with a financial advisor might be wise if you're unsure whether to lease or finance your next car.
Think about the last time you bought a new car; there's a good chance you financed it. Leasing has become hugely popular as people try to find ways to lower their monthly payments. But which option is better for you- leasing or financing? Let’s take a look at the pros and cons of each with the experts from Bill Holt Chevrolet.
All You Need to Know About Car Leasing
Leasing a car is becoming increasingly popular. Considering the recent boom in the car leasing market – It's worth discussing.
Car Leasing: Explained
Contrary to popular belief, leasing a car is not the same as renting one. When you lease an automobile, you're essentially borrowing it from the dealership or car company for a set period. You make monthly payments during this time, but you don't own the car outright at the end of the lease.
What Benefits Do You Get?
Now, you might be wondering why anyone would want to lease a car if they don't own it in the end. And that's a valid question. But leasing a car comes with many benefits.
1. Leasing a car can also be a good option if you like to have the latest model every few years. Since leases only last for a set time (usually two to four years), you can trade in your old leased car for a new one at the end of your lease.
2. Leasing a car is often cheaper than financing one. This is because you're only paying for the portion of the car's value you use during your lease. You're not responsible for the entire value of the vehicle.
The Disadvantages Of Leasing a Car
Of course, there're also a few downsides to leasing a car.
1. You'll have to be cautious about how many miles you put on the car. Most leases come with mileage limits (usually between 10,000 and 15,000 miles per year) and charge extra fees if you exceed that limit.
2. You will never own the vehicle. This means you can't sell or trade it for its full value when you're done with it.
All You Need to Know About Car Financing
Auto finance has been the primary mode of car purchasing for decades for most car owners in the United States. Let's explore what it entails:
What is Car Financing?
When you finance your car, you're essentially taking out a loan to cover the cost of the vehicle. You'll make monthly expenses on the loan until it's paid off, at which point the car will be yours.
There're a few different types of loans you can take out to finance your car. The most common is an auto loan, a personal loan used to finance a car purchase. You can also finance your vehicle through a dealer by taking out an auto loan from them or using a home equity line of credit.
What Are the Pros?
There're a few advantages to consider when deciding whether car financing is the best option for you.
1. One of the most significant benefits of financing your car is that it allows you to build equity in the vehicle. As you make payments on your loan, you'll own more and more of the vehicle until it's eventually yours.
2. Financing a car allows you to sell or trade-in your vehicle anytime without worrying about any early termination fees that might come with leasing.
3. Another significant benefit of financing a car is that it can help improve your credit score. Suppose you hand out your payments on time and in full each month. In that case, you'll begin to create a positive payment history, one of the key factors lenders look at when considering your creditworthiness.
What Are the Cons?
Of course, you should be aware of a few potential drawbacks to financing a car before making your decision.
1. One of the most significant disadvantages of financing your car is that you could end up owing more than the ride is worth if you have to sell it or trade it in before you fully repay the loan. This is because, as you make your loan payments, the interest you owe will decrease, but the principal balance will decrease much more slowly.
2. If you do decide to finance a car, make sure to shop around for the best interest rate and terms that you can find. It’s also important to read the fine print of your loan agreement carefully before signing anything.
3. Another disadvantage of financing a car is that getting approved for a loan can be difficult if you have bad credit. This is because lenders see people with bad credit as higher-risk borrowers, so they may be less likely to back them for a loan.
Which Option Should I Go With?
If you're unsure whether you should lease or finance your next car, consider asking yourself these questions.
1. Are you careful with your belongings? You may have to pay for damages at the end of your lease if the car is returned in less than perfect condition.
2. Do you have a steady income? You'll need to make sure you can afford the monthly payments if you finance a car.
3. Do you like having the latest models? Leasing enables you to drive a new model every few years.
4. Do you put a lot of miles on your car? If you cross the mileage limits in your lease, you could pay extra fees.
5. How long do you plan to keep the car? Leasing might be ideal if you only need it for a few years.
Speaking with a financial advisor might be a smart move if you're unsure whether to lease or finance your next car. They can help you compute which option is best for your needs.
Here's How Bill Holt Chevrolet Can Help You!
If you're still unsure whether leasing or financing a car is the right choice, Bill Holt Chevrolet, serving Chatsworth, GA, is here to help. Apart from having a massive inventory of new and pre-owned vehicles, our team can also help you with the financing process. Call us today, or stop by our dealership to learn more!