Loan vs Lease…..
Do you want to know the differences between a loan and a lease? Are you wondering what’s the best way to finance your next car purchase? Our Loan vs Lease analysis will help you to understand the pros and cons of each method so you can decide what’s best for you.
How Does A Car Loan Work?
A car loan allows someone to borrow the money to buy a car. Car loans are usually secured, which means that the lender (e.g. bank, finance company) uses the car as collateral and registers an interest (also known as an encumbrance) to show others that they are using it as security for the loan. If the car loan is unsecured then the lender does not use the car as security.
The Key Benefits Of A Car Loan:
- Equity – Loans can be much more effective for building equity, which means that once you’ve paid the loan you have value in the car.
- Additional Payments – Generally, loans give you more flexibility to make additional payments and pay off early.
- Multi-Purpose – With an unsecured loan you can use the loan amount for more than one purpose, for example part of the loan could be used for a car and part could be used to pay off a credit card balance.
- Financing Minus Equity – if you are trading in an car which is already financed and you owe more on this loan than the car is worth you may be able to include this minus equity amount in with the new loan for the car that you’re buying.
- Potential Tax Benefits* – If you are using the car for business purposes there are various tax benefits potentially available to you in relation to the interest charges that you pay.
How Does A Car Lease Work?
A lease allows someone to use a car for a given period in return for rental payments. The user of the car does not own the car.
The Key Benefits Of A Car Lease:
- Low Repayments – By financing the GST exclusive price and including a residual value (balloon payment), which offsets an amount until the end of the lease term this can reduce your repayment and frees up more of your cash.
- Low Deposit – You can get the car that you want with $0 or minimal deposit, so you don’t need to tie your cash up in the vehicle.
- Change Car More Often – By making repayments on a lower amount leasing can give you the option of a shorter payment term so you can change and update your car more often
- Effective Budgeting – With a maintained lease you can opt to include all scheduled servicing, fuel and maintenance costs, such as registration renewal and replacement tyres within your lease. This means that one repayment covers all of your main running costs enabling you to budget more effectively.
- Potential Tax Benefits* – If you are using the car for business purposes there are various tax benefits potentially available to you in relation to the lease payments that you pay.
- Pay from Pre-Tax Income* – With a novated lease you can pay your lease and maintenance costs out of your pre-tax income and potentially benefit from the tax advantages associated with this.
For more information on the different types of leases and loans Click Here.
Find the Best Deals
No matter whether you decide that a loan or a lease is the best option for you then using the tools and resources at LoanPlace.com.au and working with a Qualified Finance Broker can help you to find the very best deals for your individual circumstances.
To get 3 Free Quotes Click Here
If you find our site content useful and informative please share with your friends.
*We strongly recommend that you consult your accountant or tax advisor to confirm the tax benefits available to you prior to entering into any finance agreement. The information provided is not intended to be used as taxation, financial or legal advice.