As car finance options such as car leases and car loans continue to grow in popularity, it can be challenging to choose between the two. Leasing a car is a more straightforward process, and individuals can be carefree about maintenance costs since they are typically taken care of by the leasing company. Car loans work in a different manner and it is a finance option that comes with its share of benefits. To make an informed choice, it is crucial to understand how each option works, weigh the pros and cons of both, and consider individual needs and preferences.
How a car lease works
A car lease allows individuals to drive a car of their choice for a limited time. The leasing company provides the car while retaining full ownership, and in return, the individuals pay monthly rentals. The company covers recurring costs such as road taxes and maintenance expenses, while some companies also include car insurance costs in the rental. Eligibility depends on factors like age, income, and credit score. At the end of the lease period, you need to return the car to the company. You have the option to take ownership by paying an amount specified by the leasing company.
How a car loan works
A car loan helps you to pay for the car in instalments. The car acts as collateral, so the lender takes ownership of the vehicle if the individual fails to repay the loan. The EMI paid towards the car loan depends on the rate of interest charged by the lender. Eligibility for a car loan depends on factors such as income, credit score, and age.
Car lease vs car loan – Key differences
The key differences between car lease and car loan are as follows:
EMI:
A car lease includes only the cost of car usage and miscellaneous expenses. Car loans monthly instalments include a portion of the car's total cost.
Mileage limit:
Leasing companies usually specify mileage limits. As a car loan is a process to own the car that you buy, there is no mileage limit.
Returning the car:
When you take a car on lease, you have to return the car at the end of the lease tenure. When you repay the entire car loan, you get complete ownership of the car after completion of the loan period. There is no need to return it.
Ownership of the car:
You can acquire ownership of the car you take on lease by paying a specified amount at the end of the tenure. When you take a car loan, you do not need to make any extra payments to acquire the car.
Adding car accessories:
Approval from the leasing company is necessary before adding accessories in a leased car. When you buy a car using a car loan, you can make modifications and adding accessories as per your wish.
Choosing between car lease and car loan
Choosing between a car lease and a car loan depends on an individual's preferences and needs. If you prefer switching between cars frequently, a car lease is the better option. However, if they want to own one or more cars, car loans will work better for you.
How to apply for a car loan/car lease online
These days you can easily apply for a car lease or a car loan online. Bajaj Finance offers new car loans and used car loans with a convenient online application process. The eligibility criteria for a car loan are simple. Repaying the monthly instalments is easier with flexible repayment plans.
