Comparing Financing And Leasing: A Comprehensive Guide

Learn More About Financing vs. Leasing a Car

When you’re ready to buy a vehicle, it’s likely you’ll find yourself at a crossroads between financing vs. leasing a car. Our team at Jones Ford Wickenburg is here to help you understand the nuances between financing vs. leasing a vehicle and help you decide which is best for you. Continue reading to learn more about the financing and leasing difference, and if you have any questions, please reach out to our team.

What Is Financing?

When it comes to financing vs. leasing a vehicle, the more traditional of the two is financing. This involves a commitment to pay off the entire agreed-upon purchase price, typically over a set period. This can be achieved through various lenders, such as banks and credit unions, or the dealership itself, giving you full ownership rights once the final payment is made. Monthly payments consist of the principal amount plus interest, with the vehicle as collateral.

Owning your car outright can build equity and provide sustained value over the long term. Once you’ve made the last payment, you’re free from monthly financial obligations and can savor the sweet freedom of the open road with an asset.

The team in our Ford finance center will work with you to put together a competitive plan. We’ll review your credit score and your financial situation, among other things, to find an auto loan that makes sense for you.

What Is Leasing?

Leasing is a more modern approach and allows you to drive a new vehicle every few years. A lease is essentially a long-term rental, wherein you pay for the vehicle’s depreciation over the lease term, plus interest, taxes, and fees. At the end of the lease, you return the vehicle unless you choose to purchase it outright.

One of the benefits of leasing vs. financing is that leasing often requires lower monthly payments and is ideal for those primed to drive a new car every few years. With a lease, you’re covered under warranty for the duration, mitigating concerns about maintenance and repairs typically associated with aging vehicles.

Leasing vs. Financing Pros and Cons

Both are great options, but they’re different. To help simplify your decision, let’s take a look at the pros and cons between the two.

Benefits of Financing

• Lower monthly payments
• Ability to purchase a more expensive car than with cash
• Opportunity to build credit score
• Access to better interest rates and loan terms
• Flexibility in payment options and schedule

Drawbacks to Financing

• Longer-term commitment and potential for higher overall costs due to interest
• Limited flexibility to sell or trade in the car before paying off the loan
• Additional fees such as origination fees, early payoff penalties, and late payment fees can add up
• May require a down payment, increasing the initial cost
• Potential for damage to credit score if payments are missed or late

Benefits of Leasing

• Lower monthly payments compared to buying a car
• Ability to drive a newer, more expensive vehicle for a lower cost
• No long-term commitment or ownership responsibilities
• Easy and convenient maintenance through lease agreements
• Flexibility to switch to a different car after the lease ends

Drawbacks to Leasing

• Limited mileage options, potentially resulting in overage fees if exceeded
• Restrictions on customization or modifications to the leased car
• Potential for additional fees and charges at the end of the lease, such as excess wear and tear or disposition fees
• No ownership equity in the vehicle
• Termination fees or penalties for ending the lease early

Decision Time: Buying vs. Leasing a New Car

To make the best decision, it’s important to weigh your preferences, financial situation, and driving habits. We also encourage you to use a financing vs. leasing calculator to predict costs and consider the following questions:

• Will I drive enough to make a lease economical?
• How important is vehicle ownership to me?
• What are my long-term financial goals?
• Do I value the ability to customize my vehicle?
• Am I interested in trading in my car for a new model regularly?

For those who approach buying vs. leasing a car wanting stability and long-term value, buying may be the most strategic move. However, if you’re attracted to the idea of flexible payments and access to the latest models, leasing can be perfect. No matter your decision, be sure to browse all Ford vehicles finance and lease specials to see how you can save.

Contact Jones Ford Wickenburg if You Have Any Questions

Visit Jones Ford Wickenburg, your Ford dealer in Wickenburg, AZ, or contact us for more information on leasing or financing. If a specific vehicle has caught your eye, be sure to schedule a test drive.

Frequently Asked Questions

What is the difference between financing and leasing a vehicle?

With financing:

• You own the car
• Payments are usually higher
• You can keep the car as long as you want
• You can customize the vehicle

With leasing:

• You’re renting the car
• Payments are typically lower
• You must return the car at the end of the lease, or you have the option to buy
• You can’t make significant modifications

If you have any questions, please contact our team today.

Which is better, financing or leasing a car?

The notion of “better” is subjective and depends on your individual preferences and financial situation. If you prioritize long-term ownership and a return on your investment, financing is likely the superior choice. However, if you’re attracted to the allure of lower payments and frequent access to new models, leasing may be the more appealing option. Either way, our team will work with you to put together a competitive plan.

Is leasing a car good or bad for your credit?

Leasing a vehicle can have both positive and negative effects on your credit score, depending on how you manage the lease. Making consistent, on-time payments can boost your credit score, showcasing your creditworthiness to potential lenders. On the other hand, returning a leased vehicle with significant damage or failing to fulfill the contractual obligations can have an adverse impact.