MoneyWisdom Blog

Is a Better Than a Lease Loan For You?

Posted by Hanscom Federal Credit Union on Mar 16, 2015 3:18:00 PM

LeaseorLoanOnce you know the basics of buying vs. leasing, you’ll probably prefer one over the other. Maybe you like the feeling of ownership and (eventually) driving around in a paid-off vehicle. Or, you prefer lower payments and the option to return the car for a new one once the warranty ends.

If you are still unsure which option is best for you, there is a third way to consider: a Better Than a Lease Loan. With this type of loan, you own the car, but you make lower payments than with a traditional loan. You also avoid some of the out-of-pocket expenses that come with a lease.

How do you avoid these higher costs? Because you own the car, you don’t pay a security deposit. During the loan, you pay only for the depreciation, or the amount of the vehicle’s value you use.

Once your term ends, you have a few choices.

  1. Return the vehicle, paying only for excess mileage and unrepaired damage or missing original equipment.
  2. Refinance the remaining balance into a traditional loan.
  3. Sell the vehicle on your own, pay off the remaining balance, and keep any profit.
  4. Trade in the vehicle and realize any equity you have built up.

Vehicle ownership does have risks. You will probably want to have gap insurance in the event of a total loss of the vehicle before you finish the term. If there is more depreciation than predicted, you will have less equity to work with.

But the opportunity to drive a better make and model than you could otherwise afford, combined with the freedom to choose your option at the end of the term, make the Better Than a Lease Loan an attractive option for both buyers and leasers.

Lease or Buy

Topics: Cars

Add a Comment

Subscribe to MoneyWisdom Blog Updates

     
Is Investment Property Ownership Right for You?

Posts by Topic

Recent Posts