So that everyone can afford a new car, there need to be options that bypass the traditional cash purchase. It is therefore foreseeable that demand for financing options such as car loans or leasing offers will increase. The big problem? Very little flexibility, long contract terms, and a lot of paperwork. Carvolution is a brilliant alternative. Why? You will find out in this blog.
Financing – a new car on credit
A car loan, like leasing, helps to avoid the high purchase costs of a new car. With the help of a bank or financial institution, you borrow a certain amount of money to finance your dream car. You then repay this amount over a predetermined period. The advantage? From day one, you are the sole owner of your car. However, what is often forgotten are the relatively high interest rates that need to be paid in addition to the borrowed amount.
Advantages of financing
No mileage restrictions.
As the owner of the vehicle, you have the freedom to choose your own insurance and repair shop, which can save costs.
The interest on your car loan can be deducted from your taxes, as it is considered debt interest. For private customers, this is not possible with leasing.
Disadvantages of financing
Interest rates for a car loan may be higher than the costs of leasing, especially if your credit rating is lower.
As the owner of the vehicle, you bear the residual value risk when reselling. The resale value may be lower than expected, especially if the market is saturated or the model is no longer in demand.
Leasing – a new car for a limited time
Leasing is more like a long-term rental. You pay a monthly amount for the use of the car since, on paper, your dream car belongs to the leasing provider. Again, you pay for the use of the car over a set period. However, additional costs such as insurance, taxes, and tires remain your responsibility, just like with financing.
Advantages of leasing
Custom configuration of your dream car in terms of features, mileage, and condition.
The possibility of driving a new car every few years without paying the full purchase price.
Leasing rates are often lower than loan repayment rates.
No long-term commitment – at the end of the lease term, you simply return the car without worrying about reselling it.
Disadvantages of leasing
The vehicle does not belong to you during the contract period but remains the property of the leasing company. However, you are responsible for tire, service, and repair costs.
You are bound to a maximum mileage. If you exceed it, you will incur high additional costs.
Leasing customers are usually required to take out comprehensive insurance. In the event of a total loss, the insurance only pays the current market value of the vehicle. If this is lower than the remaining book value of the lease, you may have to cover the difference yourself.
Carvolution’s all-inclusive subscription – an alternative to both
An all-inclusive subscription is a great alternative if you want to avoid high upfront costs and paperwork. With Carvolution’s best price guarantee, you always pay less than with leasing. If you do find a cheaper leasing option, Carvolution will gladly adjust the price for you. You not only benefit from a lower base price but also get insurance, taxes, tires, and more included!
Conclusion
The choice between leasing and financing largely depends on your personal needs and financial situation. Here are a few questions to consider:
- Do you want to use a car without a large down payment and without owning it?
- Then leasing may be the right choice for you.
- Do you prefer long-term ownership and financial control?
- Then financing (car loan) is the better option.
- Would you like to enjoy your dream car without paperwork, while valuing flexibility, clear processes, and simple handling via an app?
- Then book your non-binding consultation today and find your next dream car with Carvolution!
