Buying a car is one of the most important decisions most people make in their lives. It is advisable to do proper research to find out what kind of car will fit your lifestyle. Before you make a purchase decision, analyze your financial situation and available financing options. Most Canadians find it difficult to differentiate between buying and leasing. However, if you consider the advantages and disadvantages of both options, you will be able to make a better decision.
You can either buy or lease a car and both options come with a set of benefits and drawbacks. It is your personal needs and financial situation that will help you choose the right option. A recent report revealed that average Canadians spend 20% of their income making auto loan payments every year. While leasing is a popular alternative to financing, auto financing is a viable option for many Canadians who want to own the car they’re paying off.
How does car financing work?
Car financing means a person enters into a contract with a lender, agreeing to make payments over a set period of time. A car dealer can have a large network of lenders who can work with people going through different financial situations. For example, Find My Auto helps people connect with lenders who can work with individuals with poor or no credit history.
Once you get approved for a car loan, it becomes your responsibility to take care of your monthly or weekly payments and pay off the loan on time and in accordance with the terms and conditions. Car loans become an attractive option when the priority is to rebuild credit, refinance or trade-in a vehicle. Once the loan is paid off, the car officially belongs to the borrower.
Leasing a car is different
When a person leases a car, he makes regular payments on the car over a fixed period of time and then returns the car once the term is over. Unlike financing, leasing is more like renting a car but for a longer period of time. When people lease a vehicle, they only pay for the vehicle’s value they use. Since you only pay the depreciation cost of a leased car, leasing a car is likely to have more attractive and lower monthly payments.
What is ideal for you?
With car financing, the entire cost of a car including interest, taxes, and fees is paid over a specific length of the term which is typically from 5 to 7 years. The longer the term length, the smaller the monthly payments. The shorter the term length, the higher the monthly payments. While in a leasing program, monthly payments are determined in accordance with the car’s residual value.
Do you want to pay slightly higher monthly payments and own the car or do you want to lease a car and make affordable monthly payments? It all depends on your unique situation. If you want to finance a car and your credit score is not that promising, consider reaching out to Find My Auto. We help Canadians get their dream cars through an affordable auto loan program. Apply for your car loan now and get approved today!