If you are like most, buying a vehicle is a significant investment you'll make. As such, it's ideal to think ahead before purchasing to account for everything from length of ownership to primary use. By doing so, it can help you identify the best vehicle for you as well as help you decide whether to finance or lease it.
If you are leaning towards financing your next car, it's important to weigh the pros and cons of your decision in relation to leasing. Here is a look at some of the benefits and drawbacks of financing that way it can help you decide which is the best option for you.
Pro: A Limited Amount of Payments
One of the main benefits of a car loan is you have the opportunity to finance a vehicle and once you pay it off you own it. Just as important is the fact you won't continually have to make car payments in the future, which is something you would need to do if you decided to lease vehicles repeatedly. This is an enormous benefit because you can save the money you would use for the vehicle payment and use it to pad your savings account or pay off other debts.
Pro: Freedom to do What You Want with Your Vehicle
Another unique benefit that comes with financing is that you have much more freedom than you would if you leased a vehicle. For one, you won't have any mileage restrictions, which is something you'll encounter with a lease. If you plan to take frequent long trips with your newer vehicle this is a factor you'll want to consider before deciding which route to take.
Con: More Maintenance Costs
The longer you own a vehicle the higher likelihood you'll have to make repairs on it especially if you drive it all the time. This is something you'll need to take into account if you plan to finance a vehicle, whereas those that lease don't have this concern, as manufacturer's warranties cover most of the problems that would arise in a short term of ownership.
Obviously, there are ways to reduce repair costs for car owners. By doing the regularly scheduled services found in your vehicle's owner's manual, it will help the vehicle run well longer, which should reduce the chances of bigger expenses arising. Additionally, you can buy an extended auto warranty. If your vehicle qualifies, these warranties can cover repairs to critical components in your automobile such as its engine or transmission.
Con: Larger Down and Monthly Payments
If you plan to finance a vehicle, the smart move would be to make a down payment equal to 20 percent of your vehicle's purchase price. For many, this is a sizeable investment. In addition, when you finance a vehicle, you'll likely make higher monthly payments than you would with a lease. Therefore, it's important to examine your budget, your long term vehicle needs and from there make a determination on which is the best course of action to take.