Car Lease vs. Car Loan: Here’s How to Decide Which Option is Right For You.

July 7th, 2023

We all know that feeling.

The first time revving a new engine. The first time sitting in those soft recliner seats. That unmistakable new car smell. When it comes down to it, purchasing a car is such a great experience!

But before you finance your new set of wheels and hit the road, there is an age-old question that needs to be answered:

Should I take out a car lease or a car loan?

With your wallet on the line, this is one of the most important questions to ask when financing a new car. In this guide, we’ll break down the differences between a car lease versus a car loan to help you make an informed decision that’s right for your next vehicle purchase.

Car lease Vs. Car Loan

First things first, let’s clarify what sets a lease apart from a loan.

A car lease is essentially a long-term rental agreement. You pay a monthly fee to use the car for a specified period before returning it at the end of the lease term.

On the other hand, a car loan is a financial agreement where you borrow money to purchase the car outright, and then you repay the loan, plus interest, over a set period.

In other words, it’s a question of ownership. Are you borrowing the car using your money (a car lease) or buying a car using borrowed money (a car loan)?

Let’s consider some reasons why you might choose either option.

Reasons for a Car Lease

1. Lower Monthly Payments

One of the key advantages of leasing a vehicle is the potential for lower monthly payments as compared to those of a car loan. Considering you are only paying for the car’s use during the specified lease term, rather than the full purchase price, your monthly payments are typically lower. This can be especially appealing if you are on a tight budget or would just prefer to spend your money elsewhere.

2. Enjoy the Latest Models

Car leasing allows you to access newer models of your desired car, or the flexibility to change your car completely and more frequently. If you choose to, you can upgrade to the latest make or model every few years, enjoying the newest features, technology, and safety advancements without the hassle of having to sell or trade in your previous vehicle – it’s just a matter of changing the terms of your car lease.

If staying at the cutting edge of automotive innovation, or just general flexibility to change your mind are priorities for you, leasing might be the way to go.

3. Maintenance and Warranty Coverage

Depending upon the supplier, lease agreements often include maintenance and warranty coverage, saving you from unexpected repair costs – after all, it isn’t you who owns the car.

Suppliers usually offer comprehensive car warranties that cover major repairs and regular maintenance during the term of your car lease. This peace of mind can be a significant benefit, as you won’t have to worry about sudden mechanical issues or the expense of routine services.

Be careful however – these warranties tend to only cover “routine” or “unavoidable” issues, meaning you might still be liable in the case of negligence and recklessness.

Reasons for a Car Loan

1. Ownership and Equity

When you take out a car loan, each payment you make to the lender will bring you closer to full ownership of the vehicle. With every passing month, you build equity in the car, and once the loan is paid off, it’s all yours as an asset.

This means that at the end of the term, you can sell or trade the vehicle in at any time.

2. No Restrictions or Penalties

A car lease will often come with certain distance restrictions, to minimise the downsides associated with overuse. With a car loan, you are the owner of the vehicle and have complete freedom to drive as much as you want, whenever you want, wherever you want without any penalties or restrictions.

The takeaway? If you have a long commute or frequently embark on road trips, a loan might be a better fit for your car needs.

3. Create and Customise!

Do you love to make additions and modifications to your cars?

If so, a car loan is almost certainly the right option for you!

Buying a car with a loan gives you the freedom to personalise it to your liking as you are the owner. From custom paint jobs to aftermarket accessories, you have full control over modifying your vehicle. Car leases, on the other hand, usually require returning the car in its original condition, limiting your ability to make alterations.

So, which one is best? Car lease Vs. Car Loan

Ultimately there is no right answer. It’s a matter of personal preference.

If you value flexibility and don’t like being tied down to one car for a lengthy period, consider a car lease. If, on the other hand, you are looking to take ownership and responsibility for a vehicle, consider a car loan.

If you still have questions and want to make an informed decision about which option may be right for your unique circumstances, simply reach out to us for a chat.

Find the right financing option for your vehicle with Private Fleet.

Private Fleet empowers you to gain all the benefits of a fleet purchase, but as a private buyer.

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying a vehicle will be as straightforward as possible for you.

Buying a car, whether through a lease, a loan or otherwise is a memorable experience – let us make it hassle-free, too.

Reach out to us today for a seamless and easy car-buying experience and all the guidance you need around your financing options.