Figuring out how to go about securing a car can be a confusing business. Financing and leasing are both great ways to get yourself a vehicle without having to part with a huge amount of money all in one go.
We have the lowdown on the differences between financing and renting, as well as which option could be the best one for you.
Difference between financing and renting a car
- Car Financing
There are lots of different ways to finance a car. You can do a hire purchase when financing a car which means that you pay a deposit upfront and then a set monthly fee. As long as all the monthly payments are made, you will own the car at the end.
Surprisingly, this agreement works best when you are financing a new car rather than a used one. You can give the car back if you change your mind, but you have to have paid off half of the cost before you can do so. You will also need to pay for any repairs that need to be done so bear this in mind as well.
You can also finance a car through a personal contract purchase. For this type of agreement, instead of getting a loan for the entire cost of the car, the loan covers the difference between the price of the car when it’s brand new and its anticipated value whenever the agreement is set to end. This is also applicable with tires and the same debate evolves around whether you should finance or rent to own tires.
With this financing deal, you tend to have lower monthly payments, but it does end up costing more overall. If you want to cancel the agreement, you have to have paid off half the price of the car before you’re able to do so. There are typically some limits when it comes to how much mileage you can do as well.
- Car Leasing
One option for car leasing is through a personal contract hire. This works in a similar way to the personal contract purchase, but the main difference is that the car does not belong to you at the end of the agreement.
The cost of this is usually higher than if you go for a personal contract purchase. However, it does include any servicing of the vehicle as well as any maintenance.
You also get greater flexibility when you’re doing a personal contract hire. This means it’s easier to switch cars if you don’t like the one you have. There’s no need to have made a set number of payments in order to do so.
There are also car subscriptions that you can use to lease a car. These are typically done through the car manufacturers themselves. You can choose from a range of subscriptions of varying lengths with the shortest being as low as one month.
The terms will vary depending on the individual subscriptions but a lot of them will cover extra costs such as insurance.
Should I finance or lease my car?
Now you know all the different ways you can finance or rent a car, which one should you choose? Well, it all depends on what you’re looking for.
If you know that you need a car long term and you’re financially secure enough to know you can afford the payments, a financing option is always going to be best. You’re locked into an agreement, and you know that you’re going to own a car at the end of it. It’s the perfect choice for someone who knows they need a car but can’t afford a huge payment upfront.
If you only need a car for a short space of time, leasing is definitely the way to go. It’s super flexible in terms of the vehicle you get, as well as being flexible in the time you have it. A lot of the extra costs you need are included, so there’s less extra stuff for you to organize.
And if you decide you actually need something long term, it’s easy to see out the end of your lease and get onto a more long-term financing plan.
Now you know all your options, which one works best for you?
