Leasing and financing are two methods to get into a new vehicle, so what method is best for you? Well, that depends on several factors, including your budget, your credit and driving habits. Read below to find out the differences between leasing and financing so you can find out which would be best for you.

Total Costs

One’s budget is very important in any big purchase because a new car payment will affect your finances for a few years. Generally, leasing a car doesn’t require a down payment and monthly lease payments are typically lower than monthly finance payments, but of course that differs on the total amount being financed. The reason for that is when you finance a car you have to pay off the total price of the vehicle within a set amount of time, but when you lease a car you are just paying the difference between the MSRP and the “residual” balance, or what the car is worth when your lease term is up. This means you pay monthly payments based on the portion of the car value you “use”.

However, if you have the budget to put a good chunk of money down for a down payment or if you can afford higher monthly payments there are benefits to financing as well. Depending on the amount you can afford to put down on a car, you might not need to finance a large amount of money and in return, your monthly payments will be lower. Plus, in the long run the vehicle is yours. So, when you are done paying for it, the vehicle is yours and there is something to show for your money. And, if you choose to sell it, you will at least make some of your payment money back.

Driving Habits or Preferences

Accident prone, average yearly miles driven, car preferences and personal customizations are all other factors that should be taken into account as well.

We all know the “bad driver” (you know who you are) if this is you, leasing may not be a good plan for you. If you are prone to accidents, dents, and scratches, this can be big cost when you return the car after your lease is up. Read the rest of this entry >>