Four main factors determine how creditors decide to give you a car financing offer
- Vehicle selection: cost, age, and mileage
- Application information: employment, residence, and income information
- Credit history: information contained in your credit file
- Down payment: total of cash and trade equity
Factors that affect your monthly payment
Your monthly payment is determined by three major factors (listed below in order of impact):
- Amount financed
- Term or length of contract
- Annual Percentage Rate (APR)
Is it better to lease or to finance?
It depends on what's most important to you. All of us have different lifestyles and priorities — in cars, life, and in finances. Car lease-versus-finance decisions must be made with your own lifestyle and priorities in mind. What's right for one person can be totally wrong for another. Luckily, we have a team of finance experts who are Happy to Help you find the best option for you – call our dealership to schedule a free consultation.
Lease — If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should lease.
Finance — If you don't mind higher monthly payments, prefer to build up some trade-in or resale value (equity), like the idea of having ownership of your car, prefer paying off your loan and being payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, expect lifestyle changes in the near future, and don't like the risk of possible lease-end charges — then you should finance.
So, is it better to lease, or to buy? As with any question of this type, there are always pros and cons, pluses and minuses, advantages and disadvantages.
- The short-term monthly cost of leasing is ALWAYS SIGNIFICANTLY LESS than the cost of buying.
For the same car, same price, same term, and same down payment, monthly lease payments will always be 30%-60% lower than loan payments. This is still true even when compared to 0% or low-interest loans.
- The medium-term cost of leasing is ABOUT THE SAME as the cost of financing, assuming the buyer sells/trades his vehicle at loan-end and the leaser returns her vehicle at lease-end.
The overall cost of leasing compared to financing, over the same lease/loan term, is approximately the same, assuming the buyer sells the vehicle at the end of the loan. Comparisons sometimes show that financing can cost a little less than leasing due to fewer fees, lower total finance costs, and the assumption that a purchased vehicle will return full market value if it is sold or traded at the end of the loan. However, when the benefits of wisely investing monthly lease savings are considered, the net cost of leasing can be less than financing.
- The long-term cost of leasing is ALWAYS MORE than the cost of financing, assuming the buyer keeps his vehicle after loan-end.
If a buyer keeps his car after the loan has been paid off and drives it for many more years, the cost is spread over a longer term. Quite simply, the cost of buying one car and driving it for ten years is less expensive than leasing or buying four or five different cars over the same period. Therefore, leasing is always more expensive than long-term buying. If long-term financial cost savings were the most important objective in acquiring a new car, it would always be best to buy the car and drive it for as long as it survives, or until the cost of maintenance and repairs begins to exceed the cost of replacing it. However, many automotive consumers have other more immediate objectives that are more important than long-term cost savings.