You try to make the best financial decisions for your life and your future. One of the big financial decisions we must make is whether to finance or lease a new car. In the debate on car finance vs. car lease, the decision on which option to choose depends on your needs. Whatever you choose, you need to be aware of how it works. This article explains the process involved in deciding whether you need to buy a car on finance or take it on lease.
1. How car financing works
If you are going for car financing to source money to buy your new car, these tips are what you need to keep in mind.
- Firstly, you need to decide where you will get financing. It could be from the car dealership itself, from a bank or credit union, or online lending institutions. While financing from a dealer can be fast, it may not offer the best rates. You need to shop around and compare interest rates before you decide where to get financing.
- Your credit rating will influence the interest rate. For example, a credit score of more than 720 can get you an interest rate of around 6.67%. If your credit score is less than 624, you may need to pay more than 16% interest.
- You can even avail of 0% interest. Such loans would be for a shorter duration of 24 to 36 months, which means you need to pay more every month.
- Confirm the term of the loan, the interest, the down payment, and make sure the monthly payment is something you can afford. Go through the contract to understand if there are any other charges.
- The best way to approach financing is to first decide how much you can afford to spend each month. You can then shop around for financing options before deciding on one.
2. How car lease works
- Car finance vs car lease, whatever you opt for, you need to talk to different leasing firms and compare prices before you decide.
- Leasing gives you the advantage of driving luxury models by paying a small amount as rent. Explore various options available before you finalize the car you want to take on lease.
- You need to study the lease contract carefully to understand the terms. Check how much is the monthly amount to be paid and if there are any other charges.
- Mileage limits need to be specified. Driving beyond the limit would increase the charges. Leasing may not work out if you drive a lot or all around the country.
- Any damage or wear and tear not covered by insurance is your responsibility. Charges would be levied at the time of closing the lease. You need to understand what these charges are and how they are calculated.
- Make sure the car is insured comprehensively. If anything happens that is not covered by insurance, then the money you spend to repair it comes from your pocket.
- If you want to buy the car at the end of the lease, understand how much you need to pay.
Once you decide between car finance vs. car lease, you would then go ahead and start the process. This article has listed out key things you need to know about the process involved. It will help you get your car on finance or lease in an easy way.