If you’re planning on getting a vehicle but aren’t sure about which options to consider, you’ve come to the right blog. Many people find themselves confused between concepts such as auto financing, auto refinancing, and leasing, etc. Some also consider all of these to be similar. However, there are some major differences between financing and leasing a vehicle. Here are some of them.
What Are the Terms Like?
When you lease a vehicle, the terms typically last between two and four years. Once the term is over, you can return the car, purchase it for the remaining value or lease another car. However, with an auto loan, the terms could last between four and six years, and they don’t come with as many options as a lease does.
Who Owns the Vehicle?
In a lease, your situation is pretty similar to renting a car. You’re supposed to pay a long-term rental for using the car. However, in an auto loan, a bank usually owns the vehicle until the loan amount is completely paid off.
Are There Any Mileage Limitations?
In the case of a lease, there’s usually a mileage limitation that you must not exceed. If you do, you may have to pay an additional fee for every extra mile when you’re returning the vehicle.
Moreover, you cannot make any alterations to the vehicle because if the leasing company finds out any wear and tear that does not fall under what the terms allow you, then you may be charged again.
When it comes to a loan, there are no limitations in terms of mileage, and you also have the freedom to alter the car however you like.
Are There Any Coverage Obligations?
When leasing a vehicle, you may be required to carry some coverage on it. Additionally, the insurance policy has your leasing company listed in it. In the case of a loan, you may have to carry the entire coverage.
What Is the Repayment Policy?
With an auto loan, your monthly payments consist of how much you finance from the total price, taxes, interest charges, etc. With a lease, your monthly payments consist of how much your vehicle is expected to depreciate during the entire term, taxes, rent charges, etc.
In the end, leasing vs. financing is a decision based solely on your personal preferences. Moreover, both choices also come with the option of auto refinancing and re-leasing if needed.