You have done all your research, read all the reviews, and have chosen the SUV you want to bring home, now the next step is figuring out the best way to pay for it. If you are not planning to pay for it in cash, you have the choice of financing or leasing. Both financing and leasing have their pros and cons, but knowing the differences can help you choose what is best for you and your financial needs. There are a number of factors to consider when deciding whether you should lease or finance an SUV and we hope the following information can help make your decision easier.
Leasing versus financing an SUV
While financing is the traditional way to pay for a vehicle that most people are familiar with, leasing has gained significant popularity over the past decade. This is in part due to lenders lessening the strict requirements that most people associate with leases. While leasing does require a slightly better credit rating in most cases, the option to lease or finance should not solely be based on your credit score. Leasing also typically has a shorter term than financing making it attractive to those that like to change vehicles every few years or do not want the worry of repair costs when the factory warranty expires. Financing over a longer term means that you will own the vehicle at the end of the term, but in many cases you will need either to opt for an extended warranty or cover any repairs needed after the warranty expires out of your own pocket.
The pros and cons of leasing an SUV
There are pros and cons of leasing an SUV that you need to weigh that typically vary from person to person.
• shorter term with option to purchase
• down payment and monthly payments are typically lower
• ability to get a new vehicle every few years
• lease term typically coincides with length of factory warranty
• mileage restrictions and charges for going over mileage limit
• financial responsibility for damage beyond normal wear and tear
• insurance rates may be higher due to higher limitations required
• vehicle is owned by the leasing company during the term of the lease
When weighing the pros and cons, you need to consider how many miles you typically drive per year to determine if it falls into the limitations. If you drive significantly more than the allowed miles, you can purchase additional mileage up front or you might want to consider financing. You also want to consider your diligence when it comes to maintaining your vehicle and remember that any damage or excess wear and tear will be charged to you at the end of the lease. Insurance premiums also tend to be higher on leases so you may want to get a quote on insurance when deciding whether to lease or finance.
The pros and cons of financing an SUV
There are also a number of pros and cons to consider when financing an SUV.
• the vehicle is yours free and clear at the end of the term
• you build equity in the vehicle and can trade it in towards a newer model after a few years
• there are no mileage restrictions
• excess wear and tear only affect the trade-in or resale value and does not immediately
come out of your pocket
• the term of the loan typically exceeds the length of the factory warranty
• payments are typically higher as you are paying for the vehicle in full
• depending on the interest rate and down payment, it may take longer to build equity to
use as a trade in
• any negative equity in a trade in is tacked on to the current loan and can increase the
term even longer
While the choice of financing or leasing an SUV is yours, knowing the pros and cons can help you choose the right option for you. Always be sure to ask your salesperson about any special finance or lease deals available. Also, ask about any additional specials they have such as discounts and factory incentives for choosing certain models or option packages. Choosing how to pay for your SUV does not have to cause undue stress. Weigh your options, determine your needs, and be realistic about how much you can afford to and want to pay. Whether you choose to finance or leave an SUV, you just want to make sure that you are not only happy with the SUV you choose but happy with the terms of ownership as well.
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