When buying a vehicle in the Richmond, Virginia area, you have two options to pay for your purchase: lease or finance. While paying in full is an option, you’re more likely looking to pay off your vehicle over time. Both leasing and financing allow you to make monthly payments, but there are differences between the two.
When you’re trying to decide whether to finance or lease a car, SUV, truck, or van, it’s important to understand what each means to ensure you’re making the right decision for your budget and your needs.
Both leasing and financing a vehicle may require you to pay some money upfront.
When you lease a vehicle, you are essentially renting the vehicle from a bank for a specified amount of time. Lease terms typically run about 2 to 4 years, and you make monthly payments for the length of that lease. At the end of the lease, you can opt to buy out the lease and continue driving the vehicle, or you can return it to the dealership so you can lease or buy another car.
Financing a vehicle means taking out a loan to purchase the vehicle. Like a lease, the loan terms will require you to make monthly payments for a specified time. When you finance a vehicle, you own it outright when the loan has been fully paid. You can then trade it in and put that money toward another vehicle, sell it privately, or continue to drive it for as long as you want.
Now that you know the difference between leasing vs. financing, there are other pros and cons to consider.
One pro of leasing a vehicle is that you may be able to get a new car more frequently. Leases typically aren’t available for used cars. Because lease terms are typically shorter than financing terms, you’re able to upgrade to the newest model or latest safety features once your lease ends.
Leasing a vehicle often requires a lower downpayment and the monthly payments can be lower than with financing, though it does typically require that you make the first payment at the time of signing. You won’t be building any equity because you won’t own the vehicle, but you may be able to afford a newer vehicle or higher trim package than if you were to finance.
Depending on the terms of your lease, you will likely remain under factory warranty for the entire time you are driving the car. This provides a feeling of security knowing that if there are any necessary repairs, the manufacturer will cover them.
Leases do come with mileage restrictions, so if you go over your allotted mileage for the lease term, you have to pay extra fees. If you want to end your lease early, there may be an early termination fee to pay. You may also have to pay for wear and tear damages when you return the vehicle.
If you opt to lease a vehicle rather than finance, you probably won’t want to make any customizations because that money will be lost once you return the vehicle at the end of the lease term. If you plan to purchase the leased car at the end of the term, then making upgrades to the vehicle won’t pose an issue.
When it comes to financing a vehicle, you can opt for a new or used one. There are no limits or restrictions on the type of vehicle you can purchase.
While the monthly payments may be higher than with leasing, you may not have to pay anything upfront. Depending on your credit, you may be able to finance with no money out of pocket. You’ll also own the car, so you’re building equity. Because the monthly and potential upfront costs can be higher, you may be more limited in the inventory that’s available in your price range.
There aren’t any restrictions with financing a vehicle, such as a cap on mileage. You can drive your new or used car as often as you’d like and put on as many miles as you want. You’re also free to make any upgrades or customizations you want to the vehicle, especially if you plan to keep driving the vehicle once the loan is paid off.
Wear and tear is to be expected with driving, but you don’t have to worry about paying fees for wear and tear damage when you finance. If your vehicle comes with a warranty, it will cover mechanical repairs to your vehicle. Once it expires, it will become your responsibility to pay for repairs.
Now that you know the differences between leasing and financing a vehicle, the next question is which is the better option for you. This comes down to personal preferences and needs.
If you’re more interested in lower payments, newer models and features, and shorter terms, leasing a vehicle may make more sense for you. If you have the budget for a higher monthly payment, you’re looking for a used vehicle, you plan to keep the vehicle for an extended time, or you know you’ll be driving a lot of miles, financing will be the better option for you.
When you’re ready to finance or lease a car in the Richmond, Virginia area, Whitten Brothers is here to help. We offer both financing and leasing options. When you finance with Whitten Brothers, we check with multiple lending institutions to get you the vehicle and payments that fit your budget.