A car is an absolute necessity for most people in Nova Scotia, but with so many ways of financing a car, it can get quite overwhelming. Both car loans and car leases are popular ways of financing a car, but which is the cheaper and more cost-effective option?
In this article, we’re going to examine the short, medium, and long-term costs of both car loans and leases. We’ll also discuss which is the best option for you. Take a look now to find out more.
Which is Cheaper: Buying a Car or a Car Lease
Both car loans and leases require monthly payments in some way, but which of these is the cheaper solution? We’ve assessed below.
Short Term Cost Comparison
In the short term, a car lease is going to be much cheaper than an auto loan. This is because monthly lease payments are usually between 30 and 60% cheaper than monthly loan payments, even when compared with loans with no or a low-interest rate.
This comparison is for the same car, at the same price, across the same term, and with the same down payment.
Medium Term Cost Comparison
In the medium term, the difference between the cost of leasing and buying is about the same. Though an auto loan has higher monthly payments, you will own your vehicle at the end of the loan and can trade it in for a profit, or continue to use it with full ownership.
With a lease, you have to return the car to the leasing company at the end of the lease. This means you never actually own the car, though you do have the option of buying it. Assuming a car leaser returns the car, the costs are approximately the same.
Long Term Cost Comparison
Turning to lease companies for your vehicle is always going to cost you more in the long term. Though you may be lured in by lower monthly payments, you never own the new car and essentially just pay to use it.
Though a car loan includes a higher monthly payment, you do eventually own the car and the cost for the new vehicle is spread across a long time, making it much cheaper in the long run.
Leasing Versus Financing: Which Should I Choose?
If you’re stuck between the two, we’ve created an easy comparison between them below so you can decide the best option for you when acquiring a new car. Take a look now.
- Cost: As discussed at length above, while a lease may be cheaper in the short term, buying your new car with a car loan is always going to be more cost-effective in the long term.
- Maintenance: When leasing a car to you, dealerships often offer free or heavily discounted repairs and maintenance. You may not get this offer with a financing agreement and this could add costs. If you’re buying a car, then you own it and are generally responsible for its repairs.
- Requirements: For both a car loan and a lease agreement, you’ll need a driver’s license, insurance, and a down payment, but that’s about it for most leases. For a car loan, you will need a good credit score and to be able to prove you have a good monthly income. This makes it harder for you to get a car loan, especially if you have a poor credit history. (Note: A financing company, like Race Auto Group, will overlook bad credit scores and help you get approved with lending partners that don’t have an issue with bad credit.)
- Penalties and fees: At the end of a lease, you may be required to pay additional fees for exceeding kilometre limits or wear and tear, whereas you own your car at the end of a loan and don’t need to pay anything. You may, however, incur fees with a car loan if you terminate it early, want to swap it with someone else’s name or choose to pay it off early.
- Other: Vehicle financing with a car loan can help to improve your credit score and is less likely to make it harder to get other kinds of loans. A lease may affect your debt-to-income ratio more than a loan.
Looking for a Car Finance and Loan Company in Nova Scotia? Contact Race Auto Group Today!
Race Auto Group is a car financing and loan company in Nova Scotia. With dealerships in Halifax, Lower Sackville and Truro, it serves all of Atlantic Canada and delivers to your home.. As a one-stop shop for all things car-related, it offers bad credit car loans, a used car inventory for sale, car rentals, and car repairs and maintenance.
The team at Race Auto Group is well-seasoned and can get you approved for a car loan, even when other lenders can’t. They will help you find your next vehicle quickly and ensure lower monthly car payments and a reasonable interest rate. A bad credit score will not affect your application here!
For more information on car loans from Race Auto Group, get in touch with the team today.