What Is The Difference Between Leasing And Financing?

As you’re researching your next car, you may have come to a crossroads: should I lease or finance? It can be hard to decide which route is right for you. Understanding the core differences between leasing and financing will help set you on the path to taking home your perfect vehicle. 

Let's explore what sets these two options apart – from the purchase price and curiosity rate to monthly costs and ownership rights. Taking just a few minutes now could save drivers thousands of dollars in the future! Before hitting that showroom floor, here's everything you need to know about leasing vs. financing.

Leasing Vs. Financing: The Meaning

Leasing a car is like renting a car for a predetermined amount of time and miles. It allows for lower monthly payments, as the payments are based on the car's depreciation during the lease. The primary benefit of leasing relies on its flexibility: it's often cheaper than financing, and you can switch out your car more frequently. 

Financing a car means taking out an auto loan to purchase a vehicle. The loan terms will depend on what type of vehicle you want, usually ranging from 4-7 years (many lenders may also offer longer loan terms). 

You build equity in your car with each payment, and you own this vehicle outright when the term ends. While leasing generally is cheaper than financing, financing gives you full ownership rights once the loan has been repaid, whereas you don't have any right to retain ownership should you choose to lease a vehicle.

Pros Of Leasing Over Financing

1.  Lower Monthly Payments

One of the biggest benefits of leasing an automobile in Kingston is that the monthly payments are often lower than they would be if you were to finance a car purchase. This is because when you lease a car, you only pay for the portion of the car’s value that you use during the lease term. For example, if you lease a $30,000 car for three years, you only pay for the portion of the car’s value that you use during those three years, which would be less than if you financed the purchase of the car and paid off the entire loan over a more extended period.

2.  No Down Payment Required

Another advantage of leasing a car is that there is typically no down payment required. When you finance the purchase of a car, you will typically need to make a down payment in order to lower your monthly payments and reduce the amount of interest you will pay over the life of the loan. However, when you lease a car, the lessee (i.e., the person who is leasing the car) typically does not have to make an advance payment.

3.  Reduced Repair Prices

One significant advantage of leasing a car in Kingston is that repair and maintenance costs are typically lower than if you were to finance and own a car. This is because when you lease a car, the manufacturer or dealer who leases you the car is typically responsible for repair and maintenance costs during the term of the lease. As such, if something goes wrong with your leased car, you can simply take it back to the dealer or manufacturer, and they will fix it at no cost to you. However, if something goes wrong with your own car, you will be responsible for all repair and maintenance costs.

4.  Flexibility at Lease-End

Towards the final stages of your lease term, you have several options that may not be available if you had purchased your car outright. For example, you can simply return your leased car in Kingston to the dealer or manufacturer with no further obligation. Or, if you like your leased car and don’t want to give it up, you can often negotiate with the dealer or manufacturer to purchase your car at a pre-determined price. Lastly, if none of those options appeal to you, you can simply walk away from your leased car with no further obligation.

Should You Lease Or Finance A Car?

With the cost of cars rising and the depressing reality of car depreciation, it can be tough to decide whether leasing or financing a car in Kingston is a better option. Regarding cost, leasing is often the more affordable option due to lower monthly payments over the longer term. On the other hand, financing a car gives you something that leasing will never offer — ownership. This allows for more freedom regarding driving distance and any additional modifications you may want to make to your vehicle. 

Depending on your lifestyle, one may be more suitable than the other. If you're planning on keeping your vehicle for more than four years, financing may be a better choice; however, if you'd like to drive a new car every four years or so and don't plan on owning it past that point, then leasing will most likely be your best bet. Ultimately, there's no right or wrong answer as it all boils down to personal preference and budget restrictions — do your research and weigh up both options carefully before making your decision.

So by the end of this post, you should better understand the critical differences between leasing and financing. If you're in the market for a car, be sure to check out our inventory in Kingston. We have plenty of options for both new and used cars so that you can make the best decision for your needs.