What is the difference between lease and finance

The long-term cost of leasing is always more than the cost of financing, assuming the buyer keeps his vehicle after loan-end. If a buyer keeps his car after the loan has been paid off, and drives it for many more years, the cost is spread over a longer term. That means the cost of buying one car and driving it for ten years is less expensive than leasing or buying four or five different cars over the same period.

If long-term financial cost savings were the most important objective in acquiring a new car, it would always be best to buy the car and drive it for as long as it survives, or until the cost of maintenance and repairs begins to exceed the cost of replacing it.

However, many automotive consumers have other more immediate objectives that are more important than long-term cost savings. When you finance or lease a vehicle, someone is holding the interest on that vehicle: a bank, a dealership, etc. Because of this, the name of the leasing company or the financier will need to appear on your insurance policy.

This process is in place so that their investment is protected. If your car is in an accident and is written off, the situation remains the same in terms of car leasing vs financing. Insurance will pay off the finance or leasing company first, and if the car is worth more than you owe, you will receive the remainder. When it comes to leasing vs financing Canada, a bad credit score is going to make things more difficult in both situations.

There is a higher likelihood that you will be denied a loan, and your rate is going to be on the higher side. Save my name, email, and website in this browser for the next time I comment. Free Accounting Course. Login details for this Free course will be emailed to you. Forgot Password? Article by Madhuri Thakur. Difference Between Finance and Lease The key difference between Finance and Lease is that in finance the customer pays off the price of the product by paying off monthly installments and if the customer fails then the lender takes away the product as the lender holds the lien on that product till payment of entire debts, whereas, in lease one has to pay monthly fixed rental for using the asset to the owner of such asset and asset is generally taken back by the owner after the expiration of lease term.

Financing is a process whereby one will buy the relatively high priced articles and is expected to pay back in the form of monthly payments.

Leave a Reply Cancel reply Your email address will not be published. Please select the batch. Cookies help us provide, protect and improve our products and services. Buying a Used Car vs a New Car?

At the end of the term, you either return it or buy it. Finance : You own the vehicle and get to keep it, use it how you want, for as long as you want, and add any customizations or modifications that you want. Finance : Usually include the cash price or a down payment, taxes, registration fees, possibly some other fees. Useful Tip!