No matter what the reason in your life might be, adding a vehicle to your life is a pretty big decision. Irrespective of whether it’s a new or used car, it will definitely be one of the most important expenses in your life. There are two main ways in which you can buy the vehicle — either finance it or buy it or lease it. So, how does one measure up the advantages and disadvantages of financing vs. leasing vehicles?

Advantages of financing/purchasing a vehicle

• Long-term costs are lower
  Car owners won’t lose out financially if they have insurance cover and will be using their vehicles extensively. Also, when the loan is over, there are no fees to be paid, like with leases.
• No restrictions
  There are no restrictions on mileage, so you can drive your car to your heart’s content.
• Owner
  In the end, you own your vehicle sans the fear of any additional fees. Even if you do have a loan, the car is, in effect, yours and only yours.

Cons of financing/purchasing a vehicle

• Resale hassles
  You’ll need to find buyers, the right sale price, and handle the hassles of sale when you want to trade your car in for another one.
• Repairs
  Once the warranty period is over, you’ll need to bear the cost of all repairs for the car.
• Monthly costs
  If you’ve taken out a loan, you’re basically paying the entire value of the car over a period of just a few years. So, your monthly outgo will be very high for a while.

Advantages of leasing a car

• Changing cars
  Since leases expire once every 2-4 years, you can sign a lease for a new car frequently.
• No resale responsibility
  Lessors aren’t responsible for selling the car, especially with the depreciation and lack of investment value.
• Warranty on leased cars
  Leased cars are covered by warranty for as long as you own it. So, you don’t have to go through the frustrations of mechanical failures ever.
• Lower monthly outgo
  Leasing a car will keep your monthly outgo on the lower end. Typically, car lease payments could go up to 60% lower than auto loan payments.

Disadvantages of leasing a car

• High cost of long-term leasing
  In the end, you will end up paying more for long-term leasing. When you own and sell a car, you’ll at least make some money off of it, but that isn’t the case with leasing. You don’t get to walk away with a car.
• Restrictions and limitations
  Leases tend to have tons of terms that one needs to adhere to and meet, otherwise the cost of not meeting them is too high a fee. For instance, there’s a restriction on mileage. Secondly, one might be asked to carry gap insurance. So, make sure to read the lease before you sign the dotted line.
• Losing your income
  Lease payments require a stable job and lifestyle, otherwise, you won’t be able to pay your lease payments. Also, getting out of lease contracts is harder as opposed to financing one.