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Breaking down what’s right for your situation

Here at Palladino Lending Solutions, we’re all about finding solutions to your credit troubles. We realize that it’s not possible for everyone to have perfect credit, and we know that problems arise that can negatively impact your credit. Frankly, we’re not too worried about how it happened—only how we can help. 

In our Auto Loans 101 series, we’re attempting to arm you with the knowledge you need to make the best decision for your situation. Before, we took a look at how vehicle financing works in Canada; today, we’re going to look at the pros and cons between leasing or financing a vehicle.

What is vehicle financing?

Financing a vehicle means you’re taking out a loan to purchase a vehicle over time. You’ll make monthly payments over a set term, at the end of which you’ll own the vehicle outright. Sort of like getting a mortgage to buy a house.

What is a vehicle lease?

Leasing a vehicle is more similar to renting; you’ll pay a monthly fee to use the vehicle over the course of a set term, at the end of which you’ll often be given the option to purchase the vehicle.

What are the pros & cons to leasing vs financing?

Depending on what you look for in a vehicle, along with how you use it, there are a variety of reasons why financing a vehicle may be better than leasing (or vice versa). A member of our team will always be happy to help you determine which choice is right for you, but below we’ve broken down a number of reasons why either option might be best for your situation.

Leasing 

  • Allows you to drive a new vehicle every few years
  • Allows you to enjoy new safety technology more regularly
  • Offers a lower monthly payment (but you won’t own the vehicle)
  • The vehicle is always under warranty
  • Great if you have a stable lifestyle and budget
  • A good option if you have prime or super prime credit
  • You can get charged early termination fees for ending your lease before the term is up

Financing

  • Helps you build equity
  • Allows you to own the vehicle
  • Allows you to customize your vehicle
  • Has higher monthly payments (but you will own the vehicle)
  • You will have to deal with repairs when your vehicle is no longer under warranty
  • A great way to rebuild your credit
  • A good option if you have subprime credit
  • You can sell your vehicle at the end (or before your loan is up)

How will my credit impact my choice?

Of course, it’s important to realize that your credit—whether subprime, prime, or super prime—will play a role in your options for purchasing a new vehicle. The lower your credit, the more difficult the task becomes (and can lead to paying higher rates) since it signals to lenders that you’re a higher risk for repayment. So while leasing a vehicle usually comes with lower monthly payments, lenders may still be skeptical when it comes time to letting you lease from them.

However, an auto loan is what’s known as a secured loan, meaning there is collateral attached to the loan—in this case, the vehicle itself. So if you stop paying your monthly installments the creditor has the opportunity to repossess the car, allowing them to sell it and make their money back. This makes it slightly easier to get an auto loan when you have poor credit, only you now have to deal with higher interest rates and/or higher monthly payments.

While it’s not impossible to lease a vehicle with subprime credit, it is quite difficult. If you’ve had any credit issues in the past but still need a vehicle, come visit the team at Palladino Lending Solutions and we can help create a solution allowing you to get behind the wheel. Not only that, but our Return To Prime program will actually help you rebuild your credit year after year. Give us a call, or fill out this form, and let Palladino Lending Solutions help you today!