With the festive season around the corner, there are surely a lot of upgrades you have in mind, such as your car. If you have decided to get a new set of wheels, ensure this decision involves a lot of planning and thought. When upgrading your ride, it is common to weigh in your options between a car loan and a car lease.
We break down car loans and car leases to help you choose the smarter option for this year’s festive upgrade. Plus, how Generali Central can support your car insurance needs.
What is a car loan?
With a car loan, you borrow a sum from a lender, which can be a bank or an NBFC, to purchase the four-wheeler. You then make monthly instalment payments to pay off the principal and interest within the stipulated period. After full repayment, you get NOC from the lender and retain the full ownership of the vehicle with an updated RC.
Here’s how you can check your vehicle RC status online. As for instant car insurance quotes, consider Generali Central.
What is a car lease?
With a car lease, you rent a vehicle on a short-term or yearly basis. During this time, you can use the car for your needs and make a monthly payment to the leasing company for its use. This monthly fee includes the costs associated with the vehicle, such as car insurance, warranty, depreciation, and other related expenses. However, you will not own the car when leasing and are obligated to return it at the end of the agreement.
Key difference between a car loan and a car lease:
Here’s how a car loan and a car lease are different from one another:
Category
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Car loan
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Car lease
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Monthly payments
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Towards loan repayment.
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Towards leasing/renting the car.
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Down payment
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Generally, a down payment is required.
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It is usually not needed or a minimal amount.
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Ownerhsip
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You get legal ownership of the car after full repayment.
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The car is not owned, only rented. You are required to return it at the end of the lease tenure.
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Mileage limit
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No limit on mileage.
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Typically, a mileage limit is imposed.
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Restrictions
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No restrictions on adding accessories.
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Adding accessories may not be permitted or heavily limited.
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Pros and points to keep in mind of a car loan
Before you get a car loan, read about its benefits and demerits:
1. Vehicle ownership after loan repayment.
2. Allowed to use the vehicle without restrictions on mileage or adding accessories.
3. The value of a new car after the car loan term stays intact as a first-owner vehicle.
Points to keep in mind
1. The car’s value depreciates over time, and so does your investment.
2. You may have to pay a hefty down payment before you get the car.
3. It is a long-term financial obligation you have to deal with.
Pros and points to keep in mind of a car lease
Before you get a car lease, understand its perks and downsides:
1. Get your desired car every few years by changing the lease.
2. Lease payments may be tax-deductible if the vehicle is used for business.
3. There is a lower financial obligation than repaying the full car value with loans.
Points to keep in mind
Limitations of usage, such as restricted mileage or modification capabilities.
Penalties to be paid upon voiding limitations.
The vehicle is not owned at the end of the term.
Should you take a car loan or a car lease this festive season?
This festive season, choosing between a car loan and a car lease is difficult. However, if you just evaluate your needs, everything becomes straightforward. For example, if you want to settle for a car for the long term, are ready for a higher financial obligation, and get full vehicle ownership, get a car loan.
However, if you want to drive a new car every few years, prefer lower monthly payments, have limited or business-specific use and don’t mind getting vehicle ownership, then a car lease is best suited for you.
Conclusion:
Both a car loan and a car lease have their merits and demerits. If you want to upgrade your wheels this festive season, make sure to evaluate your needs and current financial health before opting for one or the other. While at it, make sure to secure your four-wheeler against unexpected damage or loss with comprehensive car insurance from Generali Central.
