When you decide to have a car, you have two options to choose. You can either buy it or taking it on lease. If you plan to buy a car, you have to get a car loan, which you will be paying off over the next couple of months or even years. If the thought of taking a loan seems daunting, you can lease a vehicle.

How to choose between leasing and financing
You must know the pros and cons of financing vs. leasing a vehicle before making a decision. To make things simpler, we have explained the concepts of financing and leasing a car as well as the pros and cons of financing vs. leasing a vehicle

Financing a car
The Equated Monthly Instalment (EMI) that you pay every month secures your ownership over your car. In a couple of years, you will pay it off completely, and you get to keep the car for as long as you wish to. You will enjoy absolute ownership over your vehicle. As you are the owner of the car, you can customize it as per your tastes. If you maintain the car well, its resale value will remain high, and you can sell it at a good price after a couple of years. On the flip side, since you have taken a loan, you will be paying it back with a specified interest rate every month. As far as damages are concerned, the warranty will cover you for a certain duration, but after it expires, you will have to pay for the repairs and manage other expenses yourself.

Pros of financing a car

• Complete ownership
• Right to customize or make any changes in the car
• Opportunity to resell it and get a part of your investment back

Cons of financing a car

• Need to pay EMIs with interest rate every month
• Have to bear all expenses after the warranty period expires

Leasing a car
The amount of money you pay every month as the payment for leasing a car is usually lower than the monthly EMIs you have to pay when you finance a car with a personal auto loan. Unlike a loan, which takes a car’s full value into account, lease payments are related to the depreciation of a car’s value during the time you lease it. When you lease a car, you do not have to be concerned about the damages or mechanical failures it faces. The company you have hired it from is liable to pay for these. The problem with a car leasing contract is that you cannot get out of them before the tenure comes to an end. If you are facing financial trouble after buying a car, you can sell it off. You cannot do that when you lease one.

Pros of leasing a car

• The monthly payments are lower
• The company pays for damages and repairs
• The vehicles can be replaced at shorter intervals

Cons of leasing a car

• A stable source of income is required
• You will face mileage limits