If you are going to buy a new (or used) car and you do not have enough of your own funds, you have a choice of two financing options: a car loan and a lease. Which of these options is more advantageous? You will find the answer in this article.
It cannot be said that any of these options would generally be more advantageous. However, each of them has its advantages and disadvantages, which we will explain to you so that you can make the right decision when buying your vehicle.
There are several types of leasing, but in this article I will focus mainly on financial leasing , which is available to the general population. There is also an operating lease, but it is significantly more expensive and is used practically only by entrepreneurs to buy cars.
With financial leasing, you more or less rent a car, but with the proviso that after paying the last installment, you have the option to buy it from the leasing company. The redemption price is set in advance and usually only symbolic.
During the period of repayment of monthly installments, the car is not your property , but you must take care of it.
Advantages of leasing
- Easier and faster equipment than with a loan.
- Often without a guarantor and proof of income. The leasing company can afford it, because in case of your insolvency it will be left with “your” car.
- Tax benefits for sole traders and entrepreneurs. However, this point does not apply to you when buying a car for personal use.
Disadvantages of leasing
- The vehicle is not your property until the last installment is paid.
- When buying a vehicle, you have to pay an advance, ie a certain part of the value of the car, from your own pocket.
- You can’t just sell a purchased car because it’s not your property.
- You have to pay accident insurance because the leasing company wants to protect its property (car).
Your second option is to arrange a classic bank or non-bank loan and buy a car for borrowed money. Some companies offer a special-purpose consumer loan directly for the purchase of a vehicle, in others you can use a classic non-purpose loan for this purpose.
When using this option, the car becomes your property immediately after the purchase and you do not have to deal with the relationship with the leasing company, as is the case when using leasing. Your only obligation is to repay your loan.
Advantages of the loan
- The car is your property immediately after the purchase and you can do whatever you want with it.
- You can buy any car for borrowing money. When leasing, the company does not have to allow you to buy eg older vehicles.
- You do not have to pay an advance payment when buying a vehicle, so you do not need practically any money of your own.
- You can sell the car at any time.
- If you don’t want to pay and take out accident insurance, you don’t have to.
Disadvantages of the loan
- A bank or non-bank company can verify your income and look into the credit register, or require some form of guarantee. Because of this, you may not be able to obtain such a loan.
- Due to fees or interest on long repayments, your loan can become very expensive.
Evaluation at the end
It is really not possible to say which option is generally more advantageous. The best way to do this is to look for the best loan available and the best lease available and compare them. The offers of individual companies differ and may not be available to everyone.
You can use our comparator to find the most advantageous loan or read our comprehensive guide to loans.