Auto Financing 101 | Leasing vs. Loans

Curious About the Differences Between Leasing & Auto Loans? Wondering If You're the Right Candidate for One or the Other? Answers to These & Other Questions, Found Right Here!

There's no wrong financing path to take into the driver's seat of your new Ford Mustang, Fusion, Edge, Escape, Explorer, or F-150, but it's likely that one of them is better for you than the other, so follow along as we explore the key differences and what type or person might be better suited to one over the other.


Ford Leases & Loans-What Are They?

A lease is an agreement you make with an auto dealership to take possession of a vehicle for an agreed-upon amount of time. Leases restrict how many miles you can drive and dictate your maintenance schedule, and at the end of your lease, you have a few options as to what comes next. Your monthly payments reflect the cost of depreciation during your lease, rather than the overall cost of the vehicle.

An auto loan is money borrowed from a lender used to pay for the purchase of a new or used vehicle. Your monthly payments go toward the principal and interest portions of the loan until it's paid off.

Advantages to Leasing

  • Lower Monthly Payments: Because the monthly payments are based on depreciation and not total cost of vehicle, your monthly lease payments will usually be lower than if you'd purchased the same vehicle.
  • Short Term: Since leases are time-bound, you can get into a new vehicle ever three to five years. At the end of your lease, you can return the vehicle to the dealership and move onto something different or something newer, just like that!
  • Warranty Work: The lion's share of leases occur on new vehicles, and since leases are on average three to five years long, there's an excellent chance your vehicle will remain covered by the warranty for that entire time, meaning the cost of repairs and maintenance could be covered or greatly reduced for you.

You might enjoy leasing more than purchasing if...

  • …you want to get into a new vehicle ever three to five years.
  • …you don't drive often and could see yourself sticking to mileage limits.
  • …you would prefer a lower monthly payment to a long-term investment.
  • …if you're not sure what life might bring you and you don't want to commit to one vehicle just yet.

Advantages to Buying with a Loan

  • You Own It: It might seem silly to say, but when you buy with a loan, you own your vehicle until or unless you choose to sell it. The same isn't true of leasing, so buying your vehicle often gives people a sense of personal pride and ownership.
  • Build Equity: Contrary to what happens with lease payments, with a loan payment, you are actually building equity in an asset, so if you're into financial planning and thinking about the future, this option might be best.
  • Give It a Personal Touch: When you lease, you can't personalize the vehicle or even use unapproved replacement parts, but when you buy, you can personalize and customize your vehicle all you want-after all, it's yours!
  • You Can Sell: And unlike leases, vehicles bought with a loan can be sold if you so choose.

You might enjoy buying with a loan more than leasing if....

  • …you want to make memories with one vehicle or you become attached to your cars.
  • …you'd like to build some equity as you make your car payments.
  • …you want to personalize your vehicle.
  • …you know what you want next and feel ready to commit to a vehicle.
  • …you know what you want right now and feel comfortable with selling your vehicle down the line.

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