Buying a car can be an expensive affair, but in terms of financing versus leasing a vehicle, there are quite a few aspects to cover. While both financing and leasing a vehicle are good options, there are few things you need to be careful about. Herein, we will discuss five mistakes you need to avoid when it comes to financing vs leasing a vehicle.
1. 5 mistakes to avoid when opting for vehicle finance
The following mistakes can cost you greatly when it comes to financing a vehicle.
- Not calculating your budget
Ask yourself if you can really afford it. Determine your stable monthly cash flow. Figure out how much can you commit every month to pay your installments.
- Not determining credit score in advance
The lower your credit score the higher interest rate you’ll be asked to pay. But you can avoid this if you check your credit score way in advance and attempt to correct it before you actually apply.
- Not checking other financing options
To ensure that you get yourself the best deal, check several other financing options. Different banks may offer you different interest rates. Get a few quotes before you walk into the dealership. The dealer will most likely try to match the lowest rate you find.
- Getting convinced to become a monthly payment buyer
Don’t buy the vehicle keeping the monthly payments in mind. Negotiate the price of the car and the interest rates separately. After which you need to focus on reducing the loan term to 36 months and not more than 60.
- Ignoring the loan term
The longer the loan term, the more interest you’re paying which is clearly a loss for you and a big profit to your dealer or lender.
2. 5 mistakes to avoid when leasing a vehicle
As mentioned above, these mistakes come at a massive price:
- Paying too much down payment
Sometimes the dealer may ask you to pay a down payment of several thousand dollars, which will cover a portion of your monthly payments. This might not be a good idea, in case you meet with an accident or the car gets stolen within the first few months.
- Skipping car maintenance
Ensure that you regularly service the vehicle to avoid heavy penalties when it comes to maintenance of the vehicle.
- Not considering how many miles you’ll rack up
Vehicle lease contracts set a limit on how many miles you can drive the vehicle. Think about how often you’re going to use the vehicle before you agree on the limit. You will end up paying a hefty penalty if you go over the limit.
- Skipping the gap insurance
Before you sign the contract, check to see if gap insurance is covered. If not, pay extra to get gap insurance. This helps cover the gap between the cost of the vehicle set by the lessor and the market value of the car.
- Leasing the vehicle for more than three years
If you lease the vehicle for too long then you might end up paying more than the actual price of the car. The best way to decide on how long you want to lease the vehicle is to match it with its warranty period.
Make sure you avoid these mistakes and make proper comparisons when it comes to financing vs leasing a vehicle. Before you decide, measure the pros and cons of financing versus leasing a vehicle.