For many consumers, car ownership can sometimes feel like an unattainable goal. This is through no fault of their own; with so many people forced to live within the confines of a strict budget and so many other expenses to worry about, an adequate form of transportation often has to take a backseat (no pun intended) to other priorities. Aside from the initial cost of a vehicle up-front, there are also other expenses that come with it, such as fuel, insurance, taxes, and repairs that have to be taken care of at regular intervals. However, that doesn't mean there isn't an option that can work in your favor. At Future Chevrolet of Sacramento, we've helped many people realize their dreams of car ownership thanks to our Chevrolet financing programs. Leases and loans are both excellent ways to get on the road in a new car, and today we'll be going over each one and discussing their pros and cons. Lease vs loan, which is right for you? We're about to find out.
Leasing Pros and Cons
Perhaps there is a vehicle from the current model year that you fancy, whether that's a new Chevy Silverado, Equinox, or Malibu. Because vehicles tend to change considerably from year to year, new models usually come equipped with the latest and greatest features when it comes to comfort, safety, and driving assistance, and, more often than not, they exhibit a style that we just can't say no to. However, new cars are accompanied by new car prices, and you may feel like getting behind the wheel is just out of your price range. If you find yourself in this situation, then leasing a vehicle is undoubtedly ideal.
The best way to describe leasing is somewhat akin to the process of renting. You sign an agreement to take control of the vehicle for a predetermined amount of time. The length can vary, but you should expect a commitment of at least one year. The most common leases last for three years. One of the advantages of leasing is that you'll have a much lower monthly payment than you would if you used a loan to pay for a vehicle outright because you are only paying for the amount of time you possess the car.
In terms of monthly repairs, new Chevys are backed by manufacturer warranties, which means any unexpected service will likely be covered. Leasing also has another advantage if you enjoy keeping up with the advancements and innovations in automotive technology: you'll have the opportunity to switch to a new vehicle once the terms of your lease have run out. If you're leasing a vehicle for business purposes, you have the potential to deduct some of the expenses when you file taxes.
However, there are some disadvantages that occur when leasing a vehicle. While you save money on your monthly payments and routine service, there are other costs that tend to be higher. For instance, many insurance companies require you to take out a full coverage policy on a leased vehicle, and you will have to pay extra if you go over the agreed-upon annual mileage limits. The lack of ownership also means you cannot sell the car or trade it in as a form of equity. Finally, there are often fees if you decide to terminate your lease early, so be sure that the vehicle you're leasing is the one you want.
Acquiring a Vehicle via a Car Loan
If you're more interested in owning a car rather than leasing one for a predetermined amount of time, you might want to consider taking out a car loan to accomplish this. A car loan is borrowing money from a third-party financial institution that pays for the car outright, and each month you make a payment to the institution to recoup the amount you borrowed. For many consumers looking for an affordable method of transportation, a car loan is one of the best ways to satisfy that need.
One of the best ways to lower the amount of your loan and the subsequent monthly payments is to trade in your current vehicle as a form of equity. This advantage coincides with a disadvantage that comes with owning any vehicle––the process of depreciation. All vehicles, regardless of their make or model, undergo depreciation as their value declines with age and mileage. It's a non-linear process that varies depending on the year, make, and model. Publications such as KBB (Kelly Blue Book) chronicle the current resale value of vehicles across the entire industry. This will inform you of how much of your current vehicle's resale value has been retained and what the approximate value of any used car you're purchasing might be.
Some of the advantages that come with financing a car include having little in the way of restrictions on your purchase. Unlike leasing, there are usually no additional fees that come with terminating your ownership early. You'll also be more free to choose which insurance policy works best for you, and you can drive as much as you like. However, repairs and routine service after the end of the Chevy warranty are entirely at your discretion and must be handled from your budget. Once your car loan is paid off in full, you have complete control over what you decide to do next. You can trade your car in to begin the process over again or keep it to recoup the investment you've made in paying it off and enjoy not having any car payments.
When it comes to financing a vehicle, there are a number of important factors that you should be aware of. First, your initial down payment is often based on your current credit score. While a low credit score doesn't necessarily disqualify you from car ownership, it might mean a larger down payment and monthly installments. This is why many drivers trade in their old vehicles as a form of equity. Depending upon the size of the loan and how much you can put towards your monthly payments, you might have a payment period that can last anywhere from one to eight years. An advantage you have on your side is that you can project what your monthly cost will be in terms of insurance, fuel, and repairs that need to be performed over time.
Which One Works Better?
It's rather challenging to determine whether financing or leasing will work best; it all depends on your immediate needs and financial situation. If you're someone who simply wants to enjoy the latest and greatest features and the creature comforts of a new vehicle, leasing is undoubtedly the most advantageous. You'll be able to enjoy a new car every couple of years and have no obligation to purchase one if you don't want to.
If you are a family-oriented consumer or someone who wants to make a long-term investment in their overall quality of life, financing a new vehicle is one of the best things you can do. By taking advantage of depreciation, you can find a more affordable used or Certified Pre-Owned vehicle that will easily fit within your budget. With the ability to project the monthly cost, you'll be able to plan out your family's monthly budget ahead of time and adjust accordingly.
At Future Chevrolet of Sacramento, our specialty is helping people. Whether it's through leasing or financing your next car, we want to help you get behind the wheel and out on the road, enjoying the quality of life you truly deserve. Call or visit us today to find the Chevrolet financing you require for your next car!