What You Need to Know About Leases vs Loans

November 20th, 2020 by

A couple is signing paperwork on a Chevy lease deal.

When buying a new Chevy, one of the first things you are probably going to think about is cost, primarily, how you are going to cover that cost. Car buying offers a variety of options when it comes to paying. If you can, go ahead and buy your Chevy outright. However, most of us aren’t financially stable enough to pay all at once and will have to choose between leasing or taking out a loan on our next car. But which option is better? Should you be looking for Chevy lease deals or the best interest prices for loans?

The question of whether to lease or get a loan all depends on your credit, current financial standing, if you are going to want to get a new car in a couple of years, and personal preferences. There are good and bad points to each option that may tip the scale for you when deciding. Let’s look at some of the differences and see if we can’t help you figure out which is the best option.

Car Leases vs Car Loans

So, what is the difference between a loan and a lease? Basically, a car lease means you pay money on a car that you don’t actually own, while a loan means you pay money on a vehicle that becomes yours once it’s paid off. A lease is a temporary agreement where you return the vehicle at the end of the contract, while a loan is just you incrementally paying the car off.

With a car lease, you pay an agreed-upon amount upfront for the vehicle of your choice, plus a set payment monthly for the duration of your lease period. At no point during the leasing process do you own the car. A lease is, in short, a rental. After the lease term, you return the car and can either walk away, buy the vehicle, or lease another vehicle of your choice.

On the other hand, a car loan is a path to car ownership and is a payment plan towards full possession as opposed to a rental. Taking out a car loan involves borrowing money from a financial institution, then paying on the car monthly for an agreed upon amount of time (generally from 24 to 72 months). Once the loan is repaid, you own the car!

The front bumpers from a row of cars is shown.

The Benefits of Leasing

Thinking of taking out a lease? Leasing a car shares some similarities with the loan process. For example, leases allow you to spread out payments over time, and both require a down payment. However, car leases carry their own distinct advantages as well!

Hot and Fresh: A lease allows you to drive a recent car with some of the latest technology. Most lease terms only last around three years, with many even shorter. This means not only are you in a hot new ride, but the car will still be under factory warranty for the majority of your lease period, which means you don’t have to stress over pricy repairs. You will need to take insurance on leased vehicles, just as you will with a vehicle you own.

  • Freedom: Leasing gives you a flexible, short-term path to driving a car without the long-term expense of full-ownership. A lease allows you to return the vehicle and get another updated car of your choice when the leasing term is up rather than putting in the effort of selling or trading it in. Not to mention, if you like the car, you can still own it by paying off the remaining balance (sometimes for even less than the remainder agreed upon in the contract) if the dealership allows that option.
  • Less Cost Upfront: Leases reduce your upfront expenses with just a required security deposit and the initial monthly payment. These monthly payments are nearly always lower than the monthly payment with a car loan. That’s because you are only paying for the value you use and not the full value of the car. These reduced costs can easily turn into savings you can invest elsewhere!
  • Tax Benefits: Leasing can also come with tax write-offs if you use the car for business purposes (and hang on to all records for potential audits). However, tax laws vary, so you should always consult an account to verify this potential saving on your tax return.
  • Less than Perfect Credit: If you don’t quite have the credit for a car loan, leasing a car can be a good alternative that will still get you in a car that you enjoy. Not to mention, it can help while you build your credit if you’re looking towards loans in the future. Leasing won’t always be an option for lower credit, but it is definitely worth looking into the option.

A woman is opening the door of a red toy car with the tip of a pen.

The Benefits of Having a Loan

If you’re searching for a new ride, you’ve likely come across options to obtain a car loan. Taking out a car loan comes with its own perks, all of which depend heavily on your situation and goals. Let’s take a look at some of the reasons you might want to buy a car with a loan.

  • Ownership: Car loans are, at their core, a path to ownership if you cannot afford to pay the full price of a car upfront. Once you pay off the loan, the car is yours to do with as you please. Despite car depreciation, a car is always worth something and can be sold or traded.
  • Customizability: Owning your car gives you the opportunities to modify the car to your heart’s desire. Want to update the sound system or give it a new paint job? A loan is a choice for you. Modifications are not allowed when leasing vehicles.
    Stretch Out Payments: With a loan, you have years to pay off your vehicle rather than having to scrape together all of the cash at once. Just provide a down payment and select a plan that you can afford. It may take longer to reach ownership, but it’s worth it in the end.
  • Hep Your Credit: If you have a solid credit score, finding a car loan won’t be too difficult. Not to mention, making on-time monthly payments can help you build up your credit standing, which will improve your credit over time!
  • Unlimited Miles: If you drive a lot, you’ll want to take out a loan on a car as mileage is heavily regulated under most leases. Extra mileage can turn into hefty fees once you turn in a car if you go over a leased vehicle’s mileage limit. With a loan, you can drive as much as you want without a mileage penalty waiting for you.
    Doesn’t Have to Stay Perfect: If you know that your car will take some heavy usage, a car loan is probably for you. If you tend to be somewhat more demanding on your vehicles, or have pets or children, ownership will be a better bet for you than leasing! If your car ends up looking less than perfect, it doesn’t matter because it’s yours, while a lease might charge you fees for damage and staining.
  • Your Needs Change: If your needs change and the car you originally picked out is no longer optimal, it’s much easier to sell or trade-in a car when making loan payments rather than through a lease. If you foresee potentially needing to get out of a lease early, you’ll want to consider taking out a car loan instead!

Which is best, a car lease or a car loan? It depends! If you are looking for a direct path to ownership, are committed to one car, want to make aftermarket modifications, or know that your needs may change before a lease term is up, opting for a car loan is likely the best option for you. If you love enjoying the latest in the automotive world, don’t want to pay the full value of a vehicle, or can potentially receive a tax credit for the car as a business expense, leasing a car is definitely a solid option for you!

Rick Hendrick Financing

You have many options when selecting your next Chevy, and that’s why Rick Hendrick Chevrolet Buford’s finance department is proud to be your one-stop-shop for financing. Are you interested in leasing a Chevy? Our team is ready to walk you through all of the available lease deals and vehicles so you can find the perfect match. Looking to buy using a loan instead? We are more than ready to get you the financing you need.

Do you have less-than-perfect credit, dealing with financial disruptions, or have questions about how we can help you optimize your vehicle financing? Here at Rick Hendrick, we’re happy to answer any questions you might have, and you can count on us to help you make the most of your journey towards the vehicle that’s best for you! Contact us today so we can put you on the road with a smile!

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