Lease or finance? This commonly asked question, which plagues the minds of perspective car owners globally, can be adequately resolved through research and comparative study. Here’s a quick list of "leasing versus buying" similarities to help buyers obtain their vehicles at the lowest cost.
Common grounds in car financing and car leasing
Say, you intend to invest in a Maruti Suzuki Baleno that sports an ex-showroom price of INR 5.15 lacs. Here, the entire loan amount would be divisible into the Principal + Interest (4.64 Lacs + 1.34 Lacs at 10.5 percent interest rate for 60 months). The monthly EMI would amount to INR 9,968. In both leasing and financing options, you have to pay your EMIs, registration and licensing fees, periodic taxes such as insurance premiums, costs for inspecting safety and emissions, and the ongoing maintenance costs.
The down payment for purchasing or leasing a new car would depend on the make and model of the chosen vehicle, your credit history and negotiating skills, time of the year, etc. Usually, in both cases, the amount of down payment is negotiable and can be lowered or waived of as per the discretion of your dealer. For your chosen Maruti Suzuki Baleno, the down payment would ideally be about INR 51,526, which is 7.93 percent of the total cost of financing cost
Leasing: If you decide to terminate the lease early, say in 40 instead of 60 months, you will be liable to pay the early termination charges including the deficiency charges for trading your car (only if applicable).
Financing: In this case too, you are liable to furnish the payoff amount if you choose to end the loan early. You also become responsible for any deficiency charges that come into the reckoning if you trade your vehicle.
Vehicle Maintenance and Excess Wear
Leasing: Lease agreements typically require complete adherence to manufacturer maintenance requirements. They necessitate separate payments for vehicle maintenance. Also, most leases would limit the permissible amount of wear granted to different models of vehicles. If you decide to return the vehicle, then, you may have to bear some extra charges upon exceeding those limits.
Financing: In the same way, most finance agreements want debtors to follow the maintenance requirements laid down by the manufacturer. Any error in doing so may affect the clauses of warranty protection adversely. As in the case of leasing, the costs for vehicle maintenance have to be paid for separately. Though there are no charges or limits for excessive wear to vehicles, all additional damages, wears and tears would lead to a reduction in the resale or trade-in value of the car in question.
Lease vs. Finance – What’s the road to take?
Having relevant information about buying versus buying leasing cars can help you compare the costs and features of these two options. You may have to factor in your personal preferences and add in more factors to make a more informed ‘buy’ decision.
So, how would you like to fund your new car?