Astrology

Should you lease or finance your new car?

January 20, 2022
Bharat Times

Every person is different and everyone’s financial situation is also different. One person may benefit from leasing, while another will be more comfortable with financing. Leasing or financing a car depends on the goals and financial situation of the individual.

The key difference between leasing and financing a car is that in case of a car lease, you have to return the vehicle after the leasing period. However, if you get your car financed, you get a chance to keep the vehicle after the finance period is over and all dues are paid.

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What is Car Lease?

Car lease is when you drive a vehicle of your choice for a limited period of time. You get the car from the leasing company while they have full ownership of the car. In return, you pay monthly rent to the leasing company. A major advantage is that you do not have to pay any road tax, recurring cost or even maintenance expenses of the vehicle. Some leasing companies will require you to purchase a car insurance policy, while others will add insurance costs to your monthly rental.

You must be eligible to lease a vehicle, and your eligibility depends on several factors, such as your income and age and some other criteria as decided by the leasing company. While you have to return the car to the leasing company, you can keep it if you pay a pre-determined amount to the leasing company.

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What is Car Financing?

Car financing process is different from leasing because in this process, you pay monthly installments and own the car along with the vehicle. The vehicle acts as a guarantee against the car finance; This is done so that if you fail to pay the financial commitment of the car, the lender can control and own the vehicle. The Equated Monthly Installment (EMI) that you pay for car finance depends on the interest rate of your bank/lender.

Like the car leasing process, you need to be eligible to finance your car. This eligibility also depends on your age, income, credit score etc.

things to remember

  1. Always check your credit score before financing your car.

  2. It would be best if you know the total cost of the car in advance and not just the monthly payment amount. This ensures that you have enough money available to pay off the loan for the vehicle.

  3. The monthly payment for financing is generally higher than for a lease.

Car Lease Vs Car Financing

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  1. If you lease your car, you can avail tax benefits of up to 30%. However, if you finance your vehicle, you do not get any tax benefit.

  2. You need to get permission from the leasing company to modify the car. Under financing, you have no such restriction; You can modify your vehicle as per your requirement.

  3. No guarantor is required if you lease your car; However, as a general practice, a guarantor is usually required to finance a car.

  4. 0 notes

    You must return the car after the leasing period is over. Conversely, you get to retain the vehicle and the ownership of the vehicle after the financing period is over.

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