Refinance or Lease: Car Loan Types

Choosing whether to refinance a car loan or to lease is based on what best suits your car needs. There are advantages and disadvantages associated with refinancing a car loan on an existing vehicle and leasing a new car. Knowing what these differences will help you to decide on the option that is best suited for you.

Choosing to refinance a current loan may be a good option for you to consider. Refinancing rates are low and many lenders are targeting existing loan holders with offers to refinance their car loans.

Advantages:

• You can lower you monthly car payments, which will save you money.
• You can negotiate a better rate and terms than your existing car loan.

Disadvantages:

• You may incur new loan fees and charges.
• Your credit rating will affect the availability of credit in order to refinance your loan. A car refinance loan decline could affect your credit rating.

Leasing helps you acquire a new vehicle without having to make a long-term commitment. At the end of the lease period, you have the option of buying out the lease or trading the vehicle in for a newer model.

Advantages:

• You do not have a long-term commitment to the vehicle and have greater flexibility to choose different cars.
• You can walk away from the vehicle at the end of the leasing period.

Disadvantages:

• You are limited on the number of miles that can be driven in a lease year.
• You are subject to different credit requirements for a lease than if you purchase the vehicle.

The right option for you depends on your need for the car. If you drive a lot of miles due to your occupation or lifestyle, a car lease may not be the best choice. On the other hand, if you are looking to have many new cars over the course of years, leasing may be the better option.