Most people intuitively understand the difference between a car lease and a loan. With a car loan, you borrow money from a financial institution for a certain period of time, usually from two years up to 72 months. Once you’ve paid off the loan, you own the car.
In a lease, you own nothing, and you will still own nothing at the end of the lease period. Instead, you’ll pay a certain amount of money up front, plus a payment each month during the lease period, which is generally shorter, often two or three years. At the end of that time, you turn in the car and start the whole process over again.
So should I lease or get a loan? While loans and leases are clearly different animals, they are more similar than you might think. Both are ways of spreading the cost of a big-ticket item (an expensive automobile) over time. Another similarity; whether you choose to lease or get a loan,, the first thing the dealer will look at is your credit rating.
Another way leases and loans are similar is that the price you pay is based on the cost of the car. Wherever you stand on the car loan vs. lease question, it’s up to you to negotiate the best price on the vehicle first.