The critical difference between leasing and financing a car is that you have to return the vehicle after the leasing period in the case of the car lease. However, if you get your car financed, you get to keep the vehicle once the finance period gets over and all the dues are cleared.
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A car lease is when you drive a vehicle of your choice for a limited period. You get the car from the leasing company while they retain the full ownership of the car. In return, you pay a monthly rent to the leasing company. A great benefit is that you do not have to pay any road tax, recurring costs, or even vehicle maintenance expenses. Some leasing companies will require you to purchase a car insurance policy, while others will add the insurance cost to your monthly rental.
You should be eligible to lease a vehicle, and your eligibility depends on many factors, such as your income and age and some other parameters decided by the leasing company. While you have to return the car to the leasing company, you can keep it if you pay a pre-decided amount of money to the leasing company.
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The car financing process differs from leasing as in this process, you pay monthly instalments and get to keep the car's ownership along with the vehicle itself. The vehicle acts as a guarantee against the car finance; this is done so that the lender can control and own the vehicle if you fail to pay the car's financial commitment. The Equated Monthly Installment (EMI) that you pay towards the car finance depends on your bank's/lender's interest rate.
Like the car leasing process, you have to be eligible to get your car financed. This eligibility also depends on your age, income, credit score, etc.
Always check your credit score before getting your car financed.
It would be best if you knew the total cost of the car beforehand and not just the monthly payment amount. This ensures that you have enough funds available to pay off the debt for the vehicle.
The monthly payments for financing are generally higher than that of leasing.
You can avail of tax benefits up to 30% if you lease your car. However, you get no tax benefits if you finance your vehicle.
You have to get permission from the leasing company to modify the car. Under financing, you have no such restriction; you can modify your vehicle as per your requirements.
No guarantor is required if you lease your car; however, a guarantor is usually required to get a car financed, as a general practice.
You will have to return the car once the leasing period is over. In contrast, you get to keep the ownership of the vehicle and the vehicle itself once the financing period ends.
