When it comes to funding the purchase of a new car, the options can quickly become confusing for the uninitiated. Those that simply don?t have the cash funds are going to need to look at the different finance options available, which will usually lead to them considering car finance vs. car leasing. For either of these options, though, your credit score will be checked. To get an idea what your credit rating is like, there are websites which offer tools where you can find out your credit rating, or at least get a good idea what it?s like before you apply.
The first thing to consider is whether or not the car will be purchased brand new. Cars which are sold on within the first 5-6 years will lose the most value. In fact, most people assume that if a car is sold within 5 years of being purchased brand new, it could be worth around 50% less, which is a lot of money to lose. On a similar note, just rolling a car off the dealership could cost the buyer around 10% of its value.
When considering car finance vs. car leasing, it is therefore important to consider the length of time that the car is going to be kept for. Those looking to keep the vehicle for 7-10 years or longer may benefit from purchasing the car using car finance. Those that are going to keep the car for less than 7 years, though, should probably consider getting a car leasing agreement.
At first, you may think you want to keep the car until it breaks completely, but generally this is not the case. Personal circumstances can change for the better or for the worse extremely quickly, and this can be a problem for people who have purchased their vehicle using car finance. What they will find is that they are stuck in a contract with a car that is in negative equity (they owe more than what the car is actually worth) after a couple of years, although they really want to get rid of it. For some people, this puts them in an extremely awkward position financially.
Although finance might be considered to be the best route, car leasing can sometimes be a lot less daunting to most people. Contracts on car leasing vehicles tend to be between 2-5 years at which point the individual can usually get out of the contract. Many people will find that if they want to upgrade to a higher value contract and a better car, the dealer will actually help them do this. On the other hand, not all dealers will allow the individual to downgrade their contract. Of course, this means that they are not ?tied in? with negative equity, which is something that all car purchases basically do.
Even if somebody gets a car finance deal, they can still find ways to get out of it. For example, if they didn?t want to continue paying off the car, they could get a loan, including the amount of the negative equity and pay the car off in full, regaining back their flexibility. This is for use in extreme cases, however, and it is never a good idea to take out a loan to pay off another loan.
Both options have their own advantages, and appeal to their own set of buyers, so if you do your research, hopefully you?ll end up with the best deal for you.
Source: http://www.personal-finance-blog.com/2012/10/09/car-finance-vs-car-leasing/
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