Financing a car is a layered process, from the car model to the retail price to the payment model; there's no shortage of things to consider. Using a car doesn't have to mean owning a car, and a car lease is also an interesting proposal available to clients which can help meet their needs.
So let's take a closer look at what a lease entails, how it's different from a car purchase, and what benefits each alternative brings for a prospective owner like you.
What's the difference between a lease and a purchase?
The first thing we need to cover is the key differences between a lease and a purchase and what each model truly offers. On the one hand, a purchase is a straightforward affair; a purchase is defined as buying something for its price in money or equivalent. This means that when you purchase a vehicle, be it in installments or not, the car is undeniably yours with no question about it.
A car lease is a considerably different prospect as it's not a purchase but rather a form of rent. When leasing a car the company is lending you a vehicle for a given period and miles, and during this period the client is allowed to drive them and keep it in their home as if it were theirs. However, while you can buy a car at the end of a lease, this is ultimately up to the client.
In short, when comparing a lease and a purchase the main differentiator is the ownership of the vehicle. A lease is designed to lend you a car for a given time, but the company remains full ownership of it during the allotted period.
What are the benefits?
So what benefits does a car lease offer in comparison to a car purchase? The main difference comes down to the monthly payments. When you buy a car in installments you'll be paying the overall value of the car with interest rates on top. However, when it comes to a lease, the client is charged for the expected depreciation value instead. What this means is that the company defines how much value the car is expected to lose during the lease and that's the value you have to pay. As a result lease payments are considerably lower, and they are on average up to $100 cheaper than what you'd pay for buying a car.
Another important consideration is that due to the timeframe most of the time any potential issue will be covered by the manufacturer's warranty, as leases are usually in the 3 years range most bumper-to-bumper warranties will cover them during the entirety of the lease. Leases can also be a good option for customers who are interested in switching their vehicle often, as there's no shortage of alternatives and it saves them the effort of reselling
So on broad terms leasing is considerably more practical and affordable if you don't plan to buy the car at the end of the term. And in the case you do opt to go for a purchase there's a chance that the extra money you saved during the leasing term might help you with the costs.