Car loans or car leasing which is best for you

Car loans or car leasing, which is best for you? As you might have already guessed, the question of which option is best for you, or anyone, car leasing or car loans does not always have a straightforward a or b, yes or no answer. The right option depends on the person their circumstances, goals and even personality. This does not mean there is not a right option for you. That is what this article is all about to briefly and simply expose the characteristics of car leasing and car loans to assess their differences, similarities, pros and cons. Then you can make your own decision on the matter.

What is car leasing?

Describing car leasing is strangely enough much harder than you imagine. I once read a definition on a website for car leasing that was well into page 3 without having given a clear answer to the question. This is because promoters of car leasing are fighting an uphill battle. Most people that have heard of car leasing automatically think it is a form of car rental (and it’s undeniable that there are similarities). This make people feel they are throwing good money after bad by making lease payments on a car that will never be theirs.  It is true that with car leasing, unless you specify it in the contract, there is not a sale of the car but a lease for its use. The car is always owned by the leasing company.

So what is the point of making payments on a car that will never be yours? Well there are a few. Firstly, leasing payments are much lower than car loan payments. This is because when you are paying for a car lease, you are paying for the depreciation of the car, management fees and profit for the company. However when you buy a car with a car loan, you are paying for the capital the car is worth, the interest and the loan setting up fees.

Another advantage is the peace of mind and simplicity of paying a low monthly fee and always own a new car. This is especially attractive for people who view a car, not as an investment but as necessity, an expense they budget for. Along the lines of this reasoning they accept the y will have to make monthly car payments as a fixed expense in order to have a new or lightly used car at all times. People who lease cars also enjoy a whole list of benefits that help you save money on fixed expenses.

People with bad credit also do well in accepting this option if they wish to improve their score. Car leasing is a rather safe bet for a finance company as the “loan”, which is not a loan,  This makes it easier for banks to apply for housing homes, food and clothes.

If you are in one of these situtions car leasing is an oportinity you will do well to fix.