Advantages and disadvantages of leasing and auto credit

Author : mavenup1
Publish Date : 2021-04-07 08:49:23
Advantages and disadvantages of leasing and auto credit

Choosing between leasing or auto credit to buy a car? To help you make your decision, find their advantages and disadvantages.

Leasing or credit: how to finance a car purchase?

Although auto credit is the most widespread method of financing, leasing continues to gain new followers because of its lower monthly payments. But what is the best solution to finance a car? Find the advantages and disadvantages of leasing and car credit.


Buying a car with credit, a more economical long-term solution

Buying a vehicle with a loan remains the financing method most used by the French. The opportunity to decipher its operation, its advantages, and its disadvantages.

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What is auto credit?

Auto credit consists of making a loan to purchase a new or used car. Upon validation of the loan by the bank or credit organization, the funds are paid directly to the seller. From then on owner of his vehicle, the buyer must pay a constant monthly payment until full repayment of the loan. Auto credit only concerns the purchase of the vehicle itself. Additional costs (maintenance, insurance, consumables, etc.) are not included in the loan. The buyer must, no matter what, repay his loan, even if the car is destroyed, seized, or stolen.

Advantages and disadvantages of auto credit

Carrying out a car loan to finance your vehicle allows you to choose between a new and used model. In addition to becoming the direct owner of his car, the buyer is not required to have a contribution. Unlike leasing, there is no restriction in terms of mileage. In addition, the buyer can resell their vehicle whenever they want and make any changes they want. It should also be known that, in the majority of cases, auto credit is more economical than long-term leasing, sometimes by nearly 50%.

The main disadvantage of an auto loan to finance a vehicle is to reduce the buyer's borrowing capacity for other operations. In addition to having to pay larger monthly payments (compared to the leasing rent), it is preferable to opt for borrower insurance which is very expensive. Generally, the credit lasts longer than the manufacturer's warranty.

Leasing to finance a car purchase, a solution to reduce your monthly payments

Leasing, also known as LOA (Rental with Purchase Option) is experiencing strong growth due to the rise in credit rates. But if its monthly payments are more advantageous, is leasing, therefore, more economical?

What is leasing or LOA?

The financing of a vehicle via leasing consists of signing a rental contract for a new car for generally between 2 and 6 years. At the end of this deadline, the lessee has two options: buy the vehicle at a price determined in advance or return it . Therefore, it is possible to become the owner of the car at the end of the fixed rental period or take out a new LOA for another vehicle. In the rent paid by the tenant, different costs can be included (maintenance, insurance, consumables, etc.). Unlike auto loans, there is no interest rate that impacts the transaction. Reason why leasing allows for lower monthly payments.

Advantages and disadvantages of leasing

Not only does leasing allow you to pay smaller monthly payments, it also offers the opportunity to change vehicles regularly. The manufacturer's warranty runs throughout the rental period, and the total cost of financing is determined in advance. Being simply a tenant, the driver cannot have his car seized by the courts.

The main disadvantage of leasing is that it has a higher overall cost than car loan. Although it is possible to rent a used vehicle, the offer is relatively limited. The insurance to be taken out must often be all risks, which once again impacts the cost of financing. Note also that the security deposit during an LOA can be very important.

So, leasing or car loan? It all depends on the priorities of each motorist. In particular, you have to make the choice between a more economical overall cost or lower monthly payments, being the owner or being able to change vehicles regularly.

Category : general

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