Should You Lease vs. Finance a Car?

When talking about leasing, at its core, it's like renting a car for a specific time frame, usually between two and four years. You make monthly payments for the right to essentially "borrow" the car over that timeframe. The only setback is that once your lease ends, you have to give the car back. You're not allowed to keep it forever, unlike when you decide to buy it, like you would if you purchased a new car from the beginning.

While leasing does mean you'll never fully own the car, it comes with key benefits. For one, monthly lease payments are often cheaper than monthly car loan payments would be for the same vehicle. This allows you to drive the new car of your dreams for less each month. Leasing also lets you swap cars more frequently, since your commitment is short-term—you're not stuck with the same ride for 10+ years.

The miles are limited under a lease, so leasing works best for drivers who don't put a ton of mileage on their car annually. But if you're someone who loves that new car smell and the thrill of upgraded wheels every few years, leasing could be the perfect fit for your lifestyle and budget.

Need an affordable way to cruise in a new ride? While leasing isn't for everyone, it does come with perks that make it attractive for the right driver:

Pros 

• Pay less per month: Leasing cuts your monthly cost to drive. If money is tight, leasing gets you in a new car without blowing your budget.
• No cost for maintenance: Leased cars come with warranties so you pay nothing for covered repairs. Vehicle breakdowns won't break the bank.
• Upgrade anytime: Tired of your old wheels? With leasing you can swap cars every few years and always ride in style. Perfect for drivers who love that new car feeling.

Cons

• Mileage limits: Leases limit yearly miles, often 10,000 - 15,000. Drive over and you'll pay overage fees around 10-25 cents per mile.  
• Dings and dents cost: Return the car with any wear and tear and expect penalties. Keep it pristine or pay up when the lease ends.
• You'll never own it: Leasing means you just rent the car. No equity and you must return it when the lease ends. Unless you decide on a buyout, then you will own it. 
• Leasing gets expensive: Paying perpetually to rent adds up. At somce point leasing costs more than buying new long-term.
• Can't back out easily: Breaking the lease early means major fees. Don't lease unless you're sure you can afford all payments.

Car financing provides an alternative to paying the full purchase price of a vehicle upfront. With financing, the total cost of the car is divided into monthly installments over a set repayment period, generally spanning two to six years. Instead of a large one-time cash outlay, financing allows buyers to make smaller payments over time towards the loan used to purchase the car. 

When financing a car, you'll first apply for an auto loan through a bank, credit union, or the dealership itself. The lender will review factors like your income, credit score, and down payment amount to come up with the size of the loan and your interest rate.

If approved, you'll pay a down payment first, which reduces the amount you have to borrow. Then you (or the dealer) will receive the loan funds to pay the remainder of the car's price. Your monthly car payments go towards the principal loan amount plus interest charges. As you make payments over time, you build equity in the vehicle. Once it's fully paid off, you own the car free and clear.

Car financing makes vehicle ownership more affordable by spreading costs out over time. Just be sure your budget fits the monthly payment, as you are obligated to repay the auto loan in full.

Financing puts quality pre-owned vehicles within reach, perfect for savvy drivers seeking value over flash. Financing unlocks savings while still getting you a reliable ride.

Pros 

• No mileage restrictions: When you finance a car, there are no limits on how many miles you can drive. This gives you all the freedom you want without penalties.
• No cosmetic wear fees: Since a financed car belongs to you, there are no fees for minor dents, scratches or other wear from normal use over time. This helps avoid surprise charges.
• Option to resell or trade-in: Financing allows you to sell or trade the car at any point, either using equity as a down payment on another vehicle or pocketing the cash from a private sale. This provides flexibility.

Cons

While financing opens doors, it has a few catches that savvy car shoppers should note before signing up. Before you drive off the lot, learn the limitations to ensure it truly fits your needs.

• Higher monthly payments: Monthly payments for financing often exceed lease payments. For some budgets, leasing may be more affordable.
• May limit vehicle options: Higher total cost can restrict financed options versus leasing. Affordability may require compromising on desired makes and models.
• You're responsible for maintenance: With financing, owners must budget for mechanical upkeep and repairs. Leasing bundles these costs into payments.

The following table provides you with the main differences between leasing and financing a car:

The main benefit of paying cash for a car instead of financing is that you will own the vehicle outright without any debt or interest charges. This saves you money overall compared to financing the same vehicle.

Paying cash also gives you full ownership of the car immediately. You don't have to make monthly payments for years or wait until the loan is paid off to have the title. Also, buying with cash simplifies the transaction and paperwork involved. You don't need to go through long and confusing financing applications, credit checks or loan approval processes.

The biggest catch is that few people have enough cash savings to buy a car in full. Paying cash requires disciplined saving over an extended period. But if you can pay upfront, doing so gets you an owned vehicle and saves on interest costs versus borrowing.

Deciding between leasing and financing really depends on your budget, driving needs, and how often you plan to change vehicles. Ultimately, leasing works best for those who want to swap cars frequently and drive limited miles. Financing is better for keeping a car long-term while building ownership. But you don't have to rely on only these two options, when there is a third one that gives flexibility without the strings of leasing or financing. With a FINN car subscription, you pay a monthly fee to drive a car but aren't locked into long-term commitments. You can swap between vehicles to fit changing needs.

Car subscriptions give you the benefits of always having access to a vehicle with the freedom to change your ride and usually for less money than conventional financing or leases. For hassle-free access to wheels, subscriptions are worth a look.

So don't just default to leasing or financing. A FINN car subscription offers you the best car leasing deals for an ownership-free way to simply drive.