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Every year we are faced with the tiresome question of whether it is cheaper to finance or lease a vehicle. Not everyone knows the differences. We therefore take a look at the advantages and disadvantages of both options and tell you for whom each is worthwhile.
Whether it’s your first car or your fifth: You rarely have enough money to pay for the new vehicle in cash. It is therefore a common solution to pay for the vehicle gradually in installments. But what’s best for you: financing or leasing? We present both options to you. Because only when you know both options can you decide which suits you and your current situation better.
Financing a car: These are the advantages and disadvantages
The classic way to buy a car is to finance it. The car dealer often offers this directly via a partner bank or an associated automotive bank. Alternatively, you can also obtain a loan from an independent credit institution and finance a car loan from a savings bank, for example.
As a rule, the term is between three and six years in equal installments. There are several options for car financing. You can either make a down payment with a large final installment (balloon loan) or you can spread the total amount over all installments, which will then be higher. The vehicle title remains with the lender as security until the last installment is paid.
The great advantage of financing is that you can negotiate a highly individual contract with the bank (down payment, interest, final installment, term). In addition, the car becomes your property after the last installment has been paid. This means that you are less restricted beforehand. This means you can customize your vehicle without consultation and your mileage is not limited either.
However, the disadvantage is (possibly) high final rates. You should also bear the following in mind: if you want a new vehicle, you will have to take care of selling the old one.
Leasing a car: Is it worth it?
What is leasing? In short, it can be described as renting a car for a certain period of time. As with financing, you can agree a leasing period in which the car dealership or dealer provides you with a vehicle. The monthly costs are based on the list price of the vehicle, among other things. You can reduce them by making a special leasing payment. This can be seen as an advance payment. At the end of the term, you will typically have paid the same amount.
When leasing, you should be aware that you do not own the vehicle, but you will have to pay for taxes, insurance and workshop costs. You must also consult the lessor if you want to make any changes to the vehicle.
There are several advantages to leasing. You have constant installments, can simply return the vehicle at the end of the contract and quickly choose a new car without the risk of having to sell it. For tradespeople or the self-employed, the model is also interesting from a tax perspective, as the leasing installments can be claimed. It is often also possible to take over the vehicle at its residual value at the end of the lease. In some cases, this can even make sense.
Car subscription explained: advantages & disadvantages of the leasing alternative
The main disadvantage for you is the fixed number of kilometers that you are not allowed to exceed during the term. As a gesture of goodwill, 1,000 to 2,000 km are often tolerated. Otherwise, you may have to pay up to 16 cents per additional kilometer. If you drive around 10,000 km more, you will have to pay an additional 1,600 euros. However, you can also negotiate the amount of the mileage charge in the event of an infringement when signing the contract. If you set the total mileage value too high in the contract, this will also lead to a higher rate. This can usually be adjusted retrospectively, but an additional payment will then be due for previous months.
An additional payment is also due if damage is found on delivery that goes beyond normal signs of use, such as minor stone chips.
Which is better: financing or leasing a car?
This decision depends heavily on your needs and circumstances. For the self-employed and entrepreneurs, leasing can be tempting due to the tax benefits. For private individuals, leasing may seem cheaper at first glance, but you only see the total costs at the end of the contract when additional mileage and possible damage have been paid for. However, you are tied in for a shorter period of time and can quickly switch to a new vehicle.
Financing can be the better solution in the long term – especially if it is clear from the outset that you want to keep the vehicle. You also have to pay less attention to the condition of the vehicle and can decide more freely. However, you should definitely keep an eye on the final installment and the interest rate.
Keep an eye on the differences and weigh up the pros and cons to find the best and most affordable solution for you.
- hp/picture. pixabay.con
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