Lease vs. Loan: What are the Differences?
When financing a new Ford vehicle, you typically have to choices: a lease or a loan. They each have their benefits, but it is important to understand what sets them apart in order to select the right one for you. For instance, if you want to enjoy the latest technology, and you plan to trade the vehicle in for a new one after a few years, a lease may be your best option. However, if you drive a lot, it may not be a good idea. Here is a quick rundown of the major differences.
- Vehicle Ownership: A lease is essentially a rental agreement, therefore you don't own the vehicle. Instead, you are paying for its use over a period of time. On the other hand, with a loan, you own the vehicle. You may keep it as long as you like and do what you want with it.
- Payments: Monthly payments will almost always be lower with a lease. This is because you are paying for the vehicle's depreciation over the course of the contract instead of paying into its equity. Loan payments are generally higher because you will be paying off the entire purchase price.
- Returning the vehicle: With a loan, because you own the vehicle, you will have to make your own arrangements when you no longer want it. At the end of a lease, you just need to pay any end-of-lease costs and you return the vehicle.
- Depreciation: When leasing a vehicle, you don't need to worry about its natural depreciation because you are not paying into equity. With a loan, the vehicle will depreciate, but its cash value is yours.
- Mileage Limits: Lease contracts come with mileage limits to help ensure the vehicles resale value. With a loan, because you own the vehicle, there are no mileage limits.