Buying vs Leasing a Car at Peacock CJDRF Hilton Head


Loan vs Leasing | What's the Difference?

The More You Know About Auto Loans & Leasing, the Better Prepared You'll Be When It's Time to Finance!

When you're in the throes of shopping for a new Chrysler, Jeep, Dodge, Ram, or FIAT model, your mind is often more tied up with comparisons, specs, and figures than on the financing steps that come afterwards, and that makes sense. After all, finding the right vehicle is no easy business, and it's not a small endeavor, either! You want to make sure you're making the right decision, because chances are, you're going to be driving that vehicle for a while. The same principal should apply to financing, though, since you want a financing solution that meets all your needs, one that fits into your life easily. That's where this guide comes in! We'll go over the differences between leasing and loans, what the advantages and drawbacks might be for each, so folks can see which solution might be right for drivers in the Hardeeville, Hilton Head Island, Bluffton, SC, Garden City, and Savannah, GA areas.

First Things First: What Is an Auto Loan? What Is an Auto Lease?

Auto Loans:

When you use an auto loan to purchase a vehicle, the process usually entails securing a loan from a lending agency and using that loan to pay for the cost of the vehicle from the dealership. For many drivers, the loan can be secured through our finance department, but some shoppers find other lending agencies, such as their banking institution-to get a loan from prior to coming in to shop with us. When you buy with a loan, the vehicle is yours, and you make your monthly payments to the lending agency; payments are based on the overall price of the vehicle, plus whatever interest you owe on the loan.

Auto Leases:

 An auto lease is a bit different from a loan; a lease is an agreement made with the dealership that gives you possession of the vehicle for an agreed-upon amount of time. Most leases run in the neighborhood of three to five years. During that time, your monthly payments reflect the cost of depreciation the vehicle experiences while you have it. This can often result in lower monthly payments on leased vehicles than on the same one bought with a loan, because you aren't paying for the overall cost of the vehicle.

Pros & Cons to Both Leasing & Loans:

Pros & Cons to Leasing:

  • Pros:
    • With leases, your monthly payments are often lower than they would be if you had bought the same vehicle with a loan.
    • Another benefit to the short-term nature of a lease is the fact that you can get into a fresh, new ride every few years with very little fanfare in between.
    • Leases are often only on factory-new vehicles, so there's a very good chance it will remain under warranty for the entire time you drive it, meaning some repairs or maintenance may be covered for you!
  • Cons:
    • With leases, since you're only taking possession of the vehicle for a limited amount of time, there are restrictions on how you can use that vehicle while you have it, which usually means no customization and sticking to a prescribed maintenance schedule. If you fail to adhere to the maintenance schedule, there could be penalty fees at the end of your lease terms.
    • There are also prescribed mileage allotments for leases, so if you drive over that amount, you could be hit with mileage-overage fees.
    • There are also "wear and tear" stipulations, so you could find yourself paying an additional fee if the vehicle is determined to have excess wear and tear when you return it.

Pros & Cons to Loans:

  • Pros:
    • While monthly payments tend to be higher with a loan than a lease, your payments will build equity, which lease payments won't do.
    • When you own your vehicle, many doors are open to you that you can't drive through with a lease. For example, you can customize all you'd like with a vehicle you bought, just be aware you're your personal taste might not be what the next owner wants, that is, if you ever intend to sell it!
    • And speaking of selling, one advantage to buying with a lease is the ability to sell your vehicle if you ever choose to. On the other hand, if you sell a vehicle you've leased, that's fraud, and it's a crime!
  • Cons:
    • As we mentioned, monthly loan payments tend to be higher than lease payments, which can be a disadvantage if you're not interested in growing your personal assets and building equity.
    • Depreciation is something that afflicts all new car buyers, but it's not something lease holders have to worry about. When you buy a car, its overall value drops when you take it off the lot. Sometimes the difference in what you owe on the vehicle and what the vehicle is now worth can be so great that folks elect to get extra coverage for that specifically: GAP insurance.
    • One more drawback to buying with a loan might come five or six years down the line, when the manufacturer's warranty eventually, inevitably expires. As this point, the cost of maintenance and repair falls to you entirely.

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