Loans and leases are two common options for financing a car. Here are some of the main differences between the two:
- Ownership: When you take out a loan to buy a car, you own the car outright once you pay off the loan. When you lease a car, you don't own the car and must return it to the dealer at the end of the lease term.
- Monthly Payments: Lease payments are typically lower than loan payments because you're only paying for the portion of the car's value that you use during the lease term. Loan payments are higher because you're paying for the full value of the car.
- Mileage and Wear and Tear: Lease agreements typically come with mileage limits and restrictions on wear and tear, and you may be charged extra fees if you exceed those limits. With a loan, you can drive as much as you want and don't have to worry about wear and tear restrictions.
- Upfront Costs: Lease agreements typically require a down payment and upfront fees, such as a security deposit and acquisition fee. With a loan, you may be able to finance the entire purchase price of the car.
- End of Term: When a lease term ends, you have the option to return the car or buy it outright. When a loan is paid off, you own the car and can keep it or sell it.
In general, loans are a better option if you want to own the car and plan to keep it for a long time, while leases are a better option if you want lower monthly payments and don't mind not owning the car.
