There are lots of ways to get hold of a new vehicle, and choosing how to go about it involves comparing the options and making a decision that’s based on your personal circumstances and preferences.
The main distinction most people need to worry about is between buying a car outright or leasing it instead, so what does each approach have to offer and what might sway you in a given direction?
There’s a lot to get to grips with when it comes to car financing, and the key choice here is between taking out a loan to cover the full cost of the vehicle, or signing up to a lease deal which effectively means you’re renting the car over the course of the agreement.
A traditional finance package involves putting a down payment in place, then continuing to pay off the loan month by month, with the term typically lasting several years. With the last payment of your auto loan, the car will be yours, and you can then choose to keep it, sell it or trade it in.
With a leasing deal, you’ll still need to get a down payment together and pay monthly to keep the car, but when the contract has run its course, you’ll have to either return the vehicle to the supplier, or cough up a balloon payment to buy it outright.
The upsides of leasing include being able to get access to the latest and greatest vehicles without necessarily needing to have a huge stash of cash set aside, and also having the flexibility to swap out your car every couple of years for a new model.
The downside is that you’ll be beholden to stricter rules for how you can use the car, with things like mileage caps put in place by leasing firms. You’ll also have to return the car in good condition, or else face steep fees for any mechanical or cosmetic issues that have accrued during your tenure behind the wheel.
Whether you pay the full price in cash or you take out an auto loan to cover the full cost of procuring a car from a dealer, the biggest selling point of doing so is having complete control over your automotive future.
So long as you stick to the terms of any loan and keep up with repayments, you can usually do what you like with the vehicle, although some lenders will impose restrictions that you’ll have to adhere to.
The main issue is that if you find that the loan repayments aren’t affordable, missing them will hurt your credit score and make it harder to take out finance in the future.
As mentioned earlier, the choice between buying or leasing a car has to be made according to your unique needs.
Before taking out a loan or signing up to a leasing agreement, look at how the regular repayments will impact your monthly budget. You don’t want to be siphoning most of your income into a vehicle that ultimately won’t belong to you.
If you’re paying cash, consider how the depreciation of the vehicle’s value will influence its resalability and what you can recoup when you eventually decide to move it on further down the line.
This isn’t a decision you can afford to take lightly, so speak with a finance expert if you’re still not sure whether to buy or lease a car.