Saturday, July 2, 2011

Difference Between Financing and leasing

Financing and leasing are both the same things in a way but slightly differ in procedures and liabilities. For example Financing a car means bank buy a car car and rent it to you on installments and down payment. At the end when yo pays off the amount bank paid to car dealer plus interest then bank deliver the ownership of car on your name. Auto leasing is in a way easy as compared to auto financing.
Auto Leasing needs comparatively less down payment and monthly installments. Leasing bound you in a contract to drive limited amount of miles for auto to be driven during lease term. Leasing needs a good credit history to be approved for lease. Auto Leasing or leasing of any other asset needs higher and much stronger auto insurance coverage. This amount of  auto insurance is more than if you buy a auto on cash. With a lease of 3 years it have the advantage of warranty and less depreciation. Auto leasing needs a balloon payment at the end if you want to own a car.

Auto leasing is suitable for countries where used car prices go down with the passage of time. Where car depreciates quickly leasing is good option. But where used car prices do not depreciate much and it is possible to sell cars with less depreciation after 3 or above years It better to go for car financing

Auto Leasing advantages

-Drive a new car in manufacturers warranty with less than buying a car
-Less Down payment
-less installments

Disadvantages of Auto Leasing

-Mileage restriction
-Ballon payment at the end if you want to Own car

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