__ / 4C] What is the difference between financing and leasing a vehicle? square

Financing a vehicle means you are borrowing money (taking out a loan) to purchase the vehicle outright. You make monthly payments to repay the loan, plus interest. Once the loan is paid off, you own the vehicle free and clear.<br /><br />Leasing a vehicle is more like a long-term rental. You make monthly payments for a set period (typically 2-4 years), but you don't own the car at the end of the lease term. You have the option to purchase the vehicle at the end of the lease for a predetermined price (the residual value), return the vehicle, or lease a new one.<br /><br /><br />Here's a table summarizing the key differences:<br /><br />| Feature | Financing | Leasing |<br />|----------------|-------------------------------------------|--------------------------------------------|<br />| Ownership | You own the car after the loan is paid. | You don't own the car. |<br />| Monthly Payment| Generally higher | Generally lower |<br />| Down Payment | Typically required, but can be lower. | Often lower or even zero. |<br />| Mileage Limits | No mileage restrictions. | Typically has annual mileage limits. |<br />| Wear and Tear | Normal wear and tear is acceptable. | Excess wear and tear can incur charges. |<br />| End of Term | You own the car. | Return the car, buy it, or lease a new one.|<br /><br /><br />Therefore, the main difference is **ownership**. Financing leads to ownership, while leasing does not (unless you choose to buy the car at the end of the lease term).<br />