Home Dollars & Sense To lease or to finance – which is right for you?

To lease or to finance – which is right for you?

By carbar on the August 16, 2022

5 minutes

We know that the journey to car ownership - especially in the current market - can be complicated. For most of us, either leasing or financing...

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We know that the journey to car ownership - especially in the current market - can be complicated.

For most of us, either leasing or financing is preferred over buying the car outright. Both help to break down the overall cost that buying a new vehicle can involve. 

This makes that shiny new car you’ve had your eye on far more affordable and accessible. If you’re savvy, this can allow you to still have funds set aside for emergencies, your home, holidays, family and more. 

We’re here to help you understand the difference between leasing and financing, including the pros and cons of each option so that you can make the best decision for you.

So, what does it all mean?

A car lease allows you to ‘rent’ or ‘borrow’ a vehicle from a provider for an agreed period of time.

You’ll make regular, fixed payments that cover your use of the car. All you'll need to do is fill the tank. From insurance to servicing, the rest is looked after.

When it comes to finance, you’ll purchase your vehicle with a car loan which can be paid off over a period of up to 7 years. At the end of the agreed period, you own the vehicle outright - so you can either keep it or sell it. 

It’s also easier than ever to get new or used car finance. New digital players, like CarClarity, enable you to compare a range of lenders online to find a finance deal that suits your needs, saving time, money and stress.

The pros and cons of a car lease

With a lease, there are both advantages and disadvantages.

On the bright side, you’ll be able to upgrade your car more often and will need less money up front to get into a new vehicle. With a lease, this is based on your lease term and is usually 2-3 years. You'll also only pay one payment to cover the vehicle, maintenance, registration and insurance. 

If you want to minimise cash flow tied up in depreciating assets, leasing can also be a great option. This can mean that you have additional funds where you need them, rather than tied up in a vehicle. It’s also worth chatting to your accountant to learn about the potential tax benefits of leasing that may apply to you.

The downsides of car leases are pretty simple - you won’t own the car, so can’t modify it without approval, and administration fees and other charges are typically included in your payments. If you want to exit your lease agreement early, there are also additional ‘exit’ or break fees to factor in for not seeing your lease through to the end of the agreed term.

The pros and cons of finance

If you’re leaning towards a car loan, this commitment does come with considerable advantages, too. 

The car itself will be yours. You own it.  You can drive and modify it as you please. The lender will still hold an ‘interest’ in the car while you’re paying off your debt, but the title of the car will be in your name.

You’ll potentially have more options when it comes to the make and model of the vehicle than you would with a lease.  You’ll also have the opportunity to compare lenders to find a competitive rate - making this option a cheaper one over the long term for most. You can now also do this online, with companies like CarClarity, allowing you to compare dozens of lenders to find a finance option that is right for you. 

On the flipside of finance, there will usually be higher initial costs. You'll need to sort out the rego, insurance, maintenance and repairs, too. Your car will depreciate - its value will decrease over time, and you won’t be able to upgrade quickly and easily once you’ve committed to your vehicle (until you sell it, of course). Finally, if you want to pay off your loan early and break the agreed loan term, additional fees will often apply - this can be especially frustrating if you’ve purchased a car that is no longer under warranty, and something goes wrong.

Still not sure?

If you’re still unsure whether leasing or financing your vehicle is best, we have some good news for you - we have a third option that may suit your needs.

Our car subscriptions allow you exclusive access to a fully-maintained and comprehensively insured car for a simple weekly subscription cost, similar to a lease. There are minimum costs, but unlike a lease, there are no minimum terms. Just give us two weeks’ notice to swap cars or stop your subscription.

A car subscription carries most of the benefits of a car lease, but with more flexibility. Because it’s chunked into affordable weekly payments, a carbar subscription offers an alternative to traditional car leasing that can fit your budget and lifestyle as it stands today - with the freedom to stop or swap with 2 weeks’ notice should anything change. 

If you love your subscription car and want to own it, we now also offer the ability to purchase your beloved subscription car when it works for you.

Unlike any other car retailers in Australia, carbar customers can now seamlessly switch their carbar subscription to a loan arrangement thanks to our latest partnership with car loan comparison platform, CarClarity.

The best part? You don’t even need to decide straight away. We know that a car is a big purchase, and personally allow our subscribers to switch to finance once they’re ready. Taking some time to try before you buy could save you a lot of money, time and hassle in the long run.

We’re adding new cars to our fleet every week, with hundreds of cars to choose from - whether you choose to subscribe, finance or buy. The choice is always yours.
Browse our latest selection of cars today.

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