When it comes to cars, some people find it difficult to decide what the better route is: should you buy or lease a car in Australia? This significant expense requires careful consideration of a lot of factors, particularly your needs and financial situation. To help you decide which will work well for you, let’s look at the advantages and disadvantages of car loan and car lease:
Use a car loan repayment calculator
To get the best deal, many use a car loan repayment calculator to ensure that you’re getting competitive car loan rates.
One of the common ways to finance a car is getting a car loan. After about three or five years’ worth of monthly repayments, you will be the owner of the car. Banks and other financial institutions offer a wide range of car loans. To get the best deal, many use a car loan repayment calculator to ensure that you’re getting competitive car loan rates.
The main benefit of getting a car loan is that once the loan term ends, you will be the owner of the vehicle. Even if you’re still paying for it, you can already make any changes to the vehicle. Also, you can have flexible payment terms in the sense that you may be allowed to reduce your monthly repayments by paying a balloon payment at the end of the loan term. On the other hand, getting a car loan means higher payments than when you opt for a car lease.
This means borrowing a car and you’re only paying for the use of the car for a certain period. A car lease generally comes in two types: finance lease and operating lease. The former involves paying monthly payments until the end of the term. After that, you can either go for residual payment depending on the value of the car, or move the lease to a new car and pay the lease monthly. On the other hand, the operating lease involves making monthly payments until the end of the lease term. After that, you will hand over the car.
Unlike a car loan wherein you need an initial cash outlay or deposit, a car lease does not come with a downpayment. Also, you can expect lower payments since you are only borrowing the car. But this leads to a disadvantage. At the end of the lease term, you need to return the car. You do not own it so you cannot make any modifications while leasing it.
Whether it’s a car loan or lease, the key is to take time to understand the factors involved. Compare car loans and features of car lease from several companies, and decide based on your needs and financial capacity.
Got other tips on car lease and how to compare car loans in Australia? You can share your ideas in the comments section.