Car Buying: Finance

The question to be asked when considering car buying finance for a new auto is whether to finance or lease. It is important to weigh this issue carefully and determine what your needs are relative to the vehicle. Buying and leasing are two completely separate processes and involve different approaches for the car owner. It is important to understand what makes these processes separate as you form your opinion about the question.

Purchasing the auto outright involves entering into a financial arrangement with a lender. The terms of that arrangement are spelled out in a loan agreement, which sets the terms, length of the contract, amount due, interest rate and frequency of payments. Entering into the loan agreement gives ownership of the vehicle to the purchaser, provided all conditions of the loan agreement are met.

With leasing however, the buyer is relived of the burden of ownership. The lease agreement gives the individual use of the vehicle under pre-determined conditions for a pre-determined period. When that time is up, the car may either be purchased or traded in for a newer model. This gives the individual greater flexibility than the purchaser of the vehicle because they have the ability to walk away at the end of the lease period.

The benefit of ownership is that there are no limits on the use of the vehicle. The owner drives the car as much or as little as they wish and is not restricted in any way. The lessee however, is limited under the terms of the agreement. Any miles incurred above the lease amount results in a charge that can become very expense, depending on the type of driving that is required.

A person looking to own the vehicle outright is better off considering a purchase option through loan financing. An individual who does not have a desire for a long-term commitment and would probably trade vehicles in periodically over several years is better suited with a lease. A cost comparison may be of value in determining the better option, based on the driving needs of the individual and the impact any mileage restrictions may have.

Ownership is not for every car buyer. The same holds true for leasing options. Your driving habits, preferences and driving style, as well as the amount you are looking to spend all come into the decision process. Doing a comparison and sitting down with the dealer's financing and leasing teams will clarify the differences and give you the information you need to make the right decision. Cost should not be the only factor however; you may find that a desire to own may be well served in a lease. A person who does not see himself or herself in a long-term commitment may change their mind somewhere in the lease period. Talking through your needs with a dealer professional will help you decide which option is right for you.