There are three primary ways for you to get a vehicle: making a one-time purchase of the vehicle, financing the vehicle through an auto loan, and leasing a vehicle. Out of these, the most common and the most debated options are financing vs. leasing a vehicle. The biggest point of difference between leasing and financing vehicles is based on what exactly you have paid for. This implies that both options have some advantages and regulations that you may have to follow. Here is a brief comparison of the two options that will help you make a better decision of whether to finance or lease a vehicle:

1. Ownership

• Leasing: The concept of leasing means that you have to pay to use the vehicle for a set period of time, and you will not have ownership of the vehicle. However, you have the option of returning or purchasing the vehicle at the end of the lease term.
• Financing: You gain ownership of the vehicle once you have made the complete payment over a period of time. You are free to use it as per your requirements and without any restrictions.

2. Down payment

• Leasing: When it comes to financing vs. leasing a vehicle, the down payment for leasing a vehicle typically comprises of payment for the first month of use. It also includes registration fees, taxes, and a refundable security deposit.
• Financing: Financing usually includes the total price or a down payment along with registration fees and taxes, plus additional processing fees.

3. Monthly payments

• Leasing: In most cases, monthly payments for leasing a vehicle are lower as compared to auto loans and other types of financing. The reason for this is that you only pay the vehicle’s depreciation cost over the course of the lease term. Monthly payments for leasing a vehicle also include taxes, rent charges, and interest, along with other additional fees.
• Financing: Financing a vehicle is essentially taking a loan to pay the full price of a vehicle. This means payments, in this case, are higher when comparing financing vs. leasing a vehicle. You are required to make monthly payments until you have paid off the entire value of the car. Monthly payments for financing a car include a portion of the amount borrowed, along with an additional interest payment.

4. Early termination

• Leasing: If you wish to return the leased vehicle before the end of the lease term, you are required to pay early termination fees. This fee usually costs almost the same as the sum of payments for the remaining lease term.
• Financing: A major point of difference in financing vs. leasing a vehicle is that you have the freedom to sell or trade your vehicle if you finance it. You can sell off or trade your vehicle at a time of your choice. Also, the money you earn by selling your vehicle can be used to pay off part of the loan, or in some cases, all of it.