When you buy a new vehicle, there are three options available to you. There is financing, leasing and payment in cash. Each alternative will be available with different incentives, and each has advantages and disadvantages. Ultimately, you must be able to properly target your needs in order to make the right decision.
“When we have to choose between financing and leasing, it is important to understand our needs and to have a good idea of how we intend to use our vehicle. In doing so, we will be in a better position to determine which option is best suited to our situation”, explains a financing specialist at Decarie Motors Land Rover.
On the financing side, there are three main advantages:
No restriction on mileage
The biggest advantage of financing is that the vehicle we buy belongs to us. Thus, and unlike a lease, there is no restriction on the number of kilometers that we can travel annually.
In the case of a lease, we are usually limited to 24,000 kilometers per year (options do exist for 12,000, 16,000 and 20,000 kilometers annually). So if we travel a lot of kilometers per year, it will be more advantageous to opt for financing when buying our next vehicle.
More advantageous if we keep our vehicle longer
The majority of leases do not exceed 48 months, or four years. If we want to keep the vehicle longer, we must buy it at the end of our lease. Since it will sometimes be necessary to finance this purchase with the bank, our interest rate for the loan used to pay the residual value of the lease (the amount we have to pay to buy our vehicle) will be higher.
Conversely, when we buy a new vehicle, the interest rate is often lower for the duration of the loan. So if we compare the total amount paid for financing versus a lease with residual financing, it is usually much more advantageous to finance from the start.
Better return on investment
When you finance your vehicle, you pay for an asset that will belong to you one day. In the case of a lease, you pay for a vehicle that still belongs to the automaker. When you have completed the financing contract, you can resell the vehicle or keep it for a few more years without any payments. In both cases you can recover much of the difference between the amount you pay to finance and the amount you pay to lease with this scenario.