When you buy your new vehicle with a conventional car loan, you will make monthly payments for a number of years. A good portion of each payment is interest, with an ever-increasing amount of it being paid against the principal. As you pay down the loan, you build equity until, by the time you complete your payments, the vehicle is all yours – free and clear. You can keep it until the wheels fall off, modify it any way you choose, or resell it and put the cash toward another vehicle.
If you want to purchase a vehicle, but don’t want to incur the interest of a new-car loan, you can buy a less expensive vehicle, or opt for a quality used car. “Certified pre-owned” vehicles often include a warranty, making them an attractive and economical option.
If you want to drive a late-model vehicle, while keeping your monthly payments low, leasing may be right for you. Because you are not paying back any principal, you are just repaying the amount that the car depreciates during the time you are leasing it, plus finance charges, you will likely be able to drive a more luxurious vehicle than you could otherwise afford. You will also be driving a vehicle during its most trouble-free years, usually covered by the manufacturer’s warranty.
You never have to worry about fluctuations in the vehicle’s value, or deal with the hassle of selling it when it’s time for a new car. At the end of the lease, you simply drop it off at the dealer.
Nevertheless, leasing has some disadvantages. Most notably, leasing usually costs more than an equivalent loan because you are always driving a vehicle during it’s most rapidly depreciating years. Furthermore, if you continue to lease, your monthly payments never end.
A leasing contract will specify a limited number of miles, if you go over that limit, you will pay an excess mileage penalty, ranging from ten cents to fifty cents per mile. You will also be charged for any excess wear and tear or damage to the vehicle. Lastly, early termination fees can be costly if you need to cancel the lease for any reason.
Whether you decide to purchase your vehicle using a loan, pay cash up front, or opt for a lease, you can find the best deals of any car dealer in West Chicago by visiting Hawk Ford.