Since cars were invented, they have become an integral part of our lives. Nowadays, residents of big cities are extremely dependent on them, due to the need to cover large distances on a daily basis.
Brief History of Car Financing
The first vehicles were invented at the end of the 19th century. At that time, they were considered to be more of a luxury for the rich than a means of transportation. Back then, they were not fast enough and were quite expensive to maintain.
Over time, the cars improved became faster and more convenient. People realized their value, and more and more companies began to produce various vehicles. Prices for them began to decrease, and ordinary people also had the opportunity to have a car. Following this massive success, financial institutions began to offer assistance for the purchase of cars. Nowadays, the two most popular options are car financing and lease.
What Is Car Financing?
Car financing means borrowing money from a bank, credit union, a payday loan company, such as Payday Depot, or another financial institution to buy a car. The borrower purchases a car for the lender’s money and returns thе sum with interest within a pre-agreed period and payment schedule. This type of loan is considered direct.
In the case of an indirect loan, the borrower signs a Retail Installment Sales Contract with the dealer, who sells this agreement to the bank or credit union. After that, the borrower makes payments to the financial institution that bought the contract, as in a regular direct loan. Such a loan typically has easier approval policies. However, expect to face additional fees, known as a “contract rate.”
What Is Car Leasing?
Leasing a car means acquiring the right to use it during the period agreed between the contracting parties. A lessor can also include a clause in the contract that specifies how many miles the borrower can drive per year or throughout the entire period of the contract․ Business representatives widely use this method to purchase cars. After completing the contract, the borrower has to return the car to the owner or buy it if desired. Мany people prefer leasing over car financing because the vehicles have at least a few years of warranty, and usually for the entire period of the contract, maintenance of the car is performed free of charge.
Which Type of Car Purchasing Method to Choose?
Summing up, it is obvious that car financing and leasing have differences, and you need to take them into account when making a decision. The first and main distinction is that financing a car allows you to become the car owner and have the right to sell it or upgrade it as you wish. In the case of leasing, you pay for the car rental, and almost always, the lessor puts restrictions on the mileage and vehicle modifications. Make a wise choice depending on your goals and financial situation!