When buying a car, you'll want to know your options, such as car finance vs lease. If you’re not so sure about your decision yet, this article is your guide when it comes to choosing between a car lease and finance. Hopefully, by the time you’ve finished reading, you will be more confident of your choice. Let’s begin!
To start, both car leasing and finance will allow you to pay for the car through monthly payments. However, there are plenty of differences between the two. For example, the obligations and options that you have by the time the contract ends work differently for a car lease, compared to buying your car through car financing.
For both these options, you’re sure to find one that suits your needs best. But you need to be ready to do the research because it can get quite tricky. With so many choices today to finance or lease a car, it can easily be confusing. We’ll discuss both options in this guide. Let’s first understand "what is a car lease?"
Car Lease: What You Need to Know
Getting a car lease is like renting a vehicle for the long term. The formal name of a car lease is Personal Contract Hire, which gives you a clue on what a car lease entails. Basically, leasing a car means you’ll make payments for a particular term, and then by the end of the contract, you’d need to return the vehicle. As you can see, its concept is similar to renting a car when you’re on holiday.
Some of the things you need to be aware of are the conditions such as the mileage limit. If you exceed the limit, then there will be a penalty that you need to pay for the extra miles. It’s also crucial to know other potential extra charges, for example for any damage to the car beyond the usual wear and tear. Be prepared for any of these things if you plan on leasing a car.
What is Car Finance?
With car finance, you’ll be borrowing money from a lender like a bank or financing company so you can buy your car. A Hire Purchase agreement is usually more flexible compared to other options because you can own the car by the end of the contract, and there are no mileage restrictions. However, for Personal Contract Purchase agreements, if you want to own the vehicle, there’s a final payment that you need to make. You'll have the option to decide whether you want to buy the car or not. If you find that you no longer need the car, you can also choose to end the contract.
Car Finance vs. Lease a Car
The arrangements for a car lease can be flexible. You can choose the length of time that you want to lease the car, say two years. You can also decide on how many miles you’ll cover annually. And the initial amount that you can pay prior to delivering the car is also something that you can decide on. When you’ve finalised the numbers, then the monthly payments will be calculated. You will be paying the same amount every month until you reach the end of the contract, and then return the vehicle.
With car financing, there are more options for you to choose from. Similarly, you can choose the duration of the contract, and the deposit that you can afford to pay. Most agreements that fall under car financing spread the full price of the car equally into monthly payments and the deposit. When you’ve completed the payments, the car is yours to own.
The monthly payments that you need to make in a car finance agreement are more costly compared to a car lease. It’s because you need to cover the full price of the vehicle, along with the interest. But if you want to own the car by the end of the contract, this is a great deal to consider.
Differences: Car Lease vs. Financing
- When leasing a vehicle, you can use it for a couple of years, return it, and then choose another car to lease. With car finance, you will be using the same car for a longer period.
- A car lease may have a warranty covering repairs. Buying a car through car financing means you have to be ready for more costly repairs because you’ll be using the car longer compared to leasing.
- Agreements under a car lease can put a limit on your mileage. You may also be restricted from customising the car. When you get a car using a car finance deal, you can use it as you want and you may even customise it to your liking.
Need Help with Car Financing?
The options that you can choose from when getting a car can be confusing. Carmoola is here to change that. We offer simple and flexible car financing deals so you can get the car of your choice in no time.
With our Hire Purchase agreement, you can spread the cost of your new car through monthly payments over a certain period. Compared to the Personal Contract Purchase agreement, the monthly payments can be higher. But the benefit you’ll get is that by the end of the contract, the car is yours to own already, and you will have no final payment to make.
Plan your road trips because there are no limits to the mileage you can do with your Carmoola HP finance. This agreement is also the best choice for you if you’re keen on keeping the car after the repayment period ends.
Want to know more about how you can upgrade your ride? Feel free to reach out! We’re happy to answer any questions you have about car financing. Contact us today!