Are you going to purchase a new car? Or a new house? I think you are, that is why you are looking for both option; lease and finance. If you are looking for the difference between lease and finance, you are in safe hands. Don’t worry about!
Leasing and financing are the two different methods by which people purchase something new. It may be car or house or commercial property etc. In both the methods you have to make the monthly payments.
But there is a difference also, both are not same. Both have different terms and conditions. You have to obey or sign terms and conditions of the both.
If you want to know more about the difference between lease and finance, continue reading this!
I am not forcing you, man! But if you want the right suggestion, you should scroll down.
Let’s Talk About Leasing and Financing with The example!
You cannot figure out the difference between lease and finance until I give you an example. I will put you in the example, you imagine that I am talking about you, with this you will be able to understand this easily. Alright? Are you ready to?
Fine! I think you are.
I am going to make you sit in a new car. Excuse me! Don’t be so happy. Just imagine that you are going to purchase a new car. So, which method are you going to chose? As you don’t have enough amount to pay as a whole. That is why you are scrolling for the difference between lease and finance.
As you want the best deal for you.
Got it! Ok.. You are going to buy a new car and you are going to finance it. Yeah?
Financing a Car
You want the car and you don’t have enough amount to pay for that or you are going to invest somewhere else or any other reason may be. Now, what to do? What is the solution?
You met with the agent and he asked you to purchase the car with financing the method. So, for this, you have to take the loan from the financial institution. You took the loan. Right? But next is what? You have to pay them back.
In financing a car, you take the loan, you have to pay back that loan in installments in every month. The very important thing you need to notice here! You have to pay in installments but with the interest.
Depends upon what interest is a financial institution is going to charge you. Unless and until you sell the car, you have to pay the loan with interest in the installment.
Once you paid all the loan with interest and with terms and conditions. Your car is all yours. You become the 100% owner of your car. I think you got me! Am I right?
Now, you know what is lease? Come with me, I will explain you the difference between lease and finance.
Leasing a Car
Here comes second option available for you. Leasing a car. Again I am going to make you sit in your new car but you already know that it is just an imagination.
Ok! Don’t worry! Very soon you are going to fulfill this dream as I am guiding you regarding this only.
Now, what is leasing a car? Ok, in this you are not the owner of the car, but you can drive your car like an owner. The financial institution gives you car on lease. You have to pay the monthly rental for that.
It is as same as you pay rent for the house. So. it is as simple to understand. I mean you become the tenant of the car.
But the good news is that some contract is signed before the financial institution is going to give you a car on lease. Contract may be of 2 years, 3 years or 5 years.
The contract with their terms and conditions. Conditions may be the time period or may be how many miles you can drive the car.
One more thing that you need to jot down here. Before you take the car on lease, talk about the insurance policy also. If, in case you hit that car, the, who is going to pay the damage? Is that you? Or your financial institution?
You need to read more if you want to know about the financial policy.
Leasing And Financing Connection With The Insurance
You were about to ask me about this and see I am so smart and I read your mind. Haha! Jokes apart. Let’s come to the point!
Unfortunately, if you met with an accident and your car goes under total loss situation, then your insurance company is going to pay to the financial company in both the leasing and financing conditions. You are not going to get the whole amount. This is the policy man! Financial institutions are smart enough.
When they will get the entire amount, you gonna get the remainder amount if the car costs more than you owe for it. The situation can be vise-verse. The coverage that you get in that situation is called as gap insurance.
I think you got the idea about the difference between lease and finance.
Before I conclude
If you are going to purchase a new car, then the solution for you is here. I mean, I hope you have understood what I want to say.
If you ask me, I would choose financing method as I don’t like the leasing method as I cannot bear the terms and conditions.
No! No! Don’t take me wrong? I am not forcing you to go for financing method. The choice is yours, after all, it’s your money. You decide according to your pocket.
Another point is that in financing, you pay more, you have to pay interest also, so it becomes bit pricey.
I hope my sharing is beneficial for you. Ask me if you need more assistance from my side. I would love to help you.
Till then, stay happy!