Decisions. Decisions. They are common, particularly when looking for a new vehicle, truck, or SUV. The first decision is: Should you finance your automobile or lease it? The answer is trickier than it seems since you have to think about your financial condition (also known as what you can afford) and decide what features you want in a new car.

For your help, DCH Honda Oxnard outlined some of the most significant benefits and drawbacks of leasing vs. buying—and vice versa.

Let's set the scene for individuals unaware of the distinction between leasing and financing.

What is Leasing?

In essence, leasing a car is a rental arrangement in which payments are made to rent the vehicle for a predetermined time. Leases are usually only for new vehicles, and the lessee (or driver) is generally responsible for maintenance during the life of the lease. Leases are almost always offered by dealerships, though you can also find independent leasing companies.

At the end of a lease, you have three options:

  • Purchase the vehicle outright
  • Lease another vehicle
  • Return the vehicle to the dealership

What is Financing?

Financing a car, on the other hand, means taking out a loan to purchase the vehicle outright. You'll make monthly payments on the automobile loan until it is paid off, at which point the car will be yours to keep. You can finance a car through a bank, credit union, or dealership.

Major Key Differences:

Upfront costs

The only upfront costs for leasing a car are the security deposit and the first month's payment. The security deposit usually equals one month's payment and is refundable at the end of the lease. You may also have to pay a few other fees, such as an acquisition fee, but these are typically much lower than the down payment you would need to finance a car.

When you finance a car, you must make a down payment. The down payment size will depend on the price of the car and the terms of your loan. You will need to put down at least 20% of the purchase price to get a loan with decent interest rates.

Monthly payments

A lease will almost always have lower monthly payments than a loan would.

On the other hand, leasing could not always cost less overall when compared to owning a car. If you lease, you'll make a single fixed monthly payment until the automobile is returned. If you choose to purchase, you will make monthly payments until your loan balance is completely paid off. Your monthly payment then stops.

As a result, as time passes, owning an automobile becomes less expensive. To make the most of your money, hang onto the automobile as long as possible. After repaying the loan, you won't have to make any further payments on a well-maintained automobile for many years.

Mileage restriction

Do you desire a new vehicle every few years? Do you require a luxurious vehicle to impress clients at work? You might find a lease more tempting.

However, purchasing is preferable if you want more freedom. Avoid the mileage restrictions (and associated fees) that are part of normal leases if you often travel large distances. Most leases cap your annual mileage at 12,000 miles; any further miles will cost you between $0.15 and $0.30 each.

Extra miles added at the beginning of your lease will increase your upfront fees rather than your monthly payments. Additionally, when your lease expires, going over your allotted mileage will result in fines. Consequently, returning your automobile might result in an unpleasant expense for you.


Leases always cover the entirety of a car's warranty, which is typically three years or 36,000 miles. On the other hand, financing or buying means that you will be responsible for maintenance and repairs after your warranty expires.

Car Maintenance and Repairs

Whether you own or rent, you'll be responsible for additional maintenance and damage costs.

When the warranty on a purchase expires, repairs will also be your responsibility. And as your automobile ages, your maintenance prices might increase over time. Thus, over time you might be able to remove loan payments from your budget line items, but you'll still need to account for rising maintenance and repair expenditures.

Car Insurance

Auto insurance is a need whether you buy or lease; however, leasing may result in higher costs. Guaranteed Asset Protection (GAP) insurance is typically required in addition to your regular insurance in standard leasing agreements.

As the value of the rented vehicle decreases, GAP insurance safeguards the leasing firm. If your automobile is damaged, the GAP coverage will cover the difference between the value of the car and the remaining balance on your lease.

Car Depreciation

Possession increases equity. However, depreciation goes hand in hand with owning an automobile. Undoubtedly, your car will lose value over time unless you purchase a collectible automobile.

You'll suffer the most if you purchase a brand-new vehicle because its value will fall by 20 to 30% after only the first year. The pace of depreciation then slows down. Used automobiles also depreciate, but the decline might not be as sharp.

Depreciation, however, solely affects the leasing company if you're renting. The automobile does not belong to you, so you won't have any worries.

So which is best for you?

The answer to this query is not always simple. You must consider your needs and driving habits to make the best decision. Leasing may be the one if you don't drive many miles or like having the newest car models. Financing may work better for you if you're planning to keep your car for a long time or if you drive a lot of miles. Ultimately, the best way to decide is to speak with a qualified car dealership representative about your options.

DCH Honda of Oxnard, serving Camarillo, CA, presents new Honda loan deals and Honda leasing options for you to save money on your preferred vehicle. Look for Honda's latest promotions to receive special discounts on a new car.

Contact our finance department today!
Categories: Finance