What Is The Difference Between Lease and Finance?

Planning to get a vehicle for yourself? One thing you should sort out is whether you should opt for finance for it or lease. Why is this important? Well, whichever option you choose will determine the amount you will pay for. In the following paragraphs, we have discussed the differences between them.

What Is Financing?

Financing is the option where the money is lent to you. If you go for finance, you take the money to buy it and pay regular installments to the lending company. Leasing your vehicle is where you borrow the vehicle and pay regular payments to the company lending it to you.

Financing helps you own the car; in case of non-payment, the lending company can take possession of your vehicle to sell it and recover the amount they wanted from you.

What Is Leasing

It is the dealership that owns the vehicle in the end. The dealership takes it back, remakes it properly, and sells the vehicle again as soon as your lease period finishes. If the car is not yours, what is the purpose of getting a lease? Well, you have the advantage of paying a small monthly charge to drive a new vehicle that you do not have to worry about reselling after the loan period ends.

The Difference

Let’s have a closer look at both the differences:


Lease: The ownership is not yours; it is a payment you make to use the vehicle for a fixed period of time. Once the time is up, you either return the said subject or buy it.

Finance: The vehicle is yours to keep. Use it any way you want. There is no time specified, and you are allowed to make customizations or modifications of your choice.

Down Payment

Lease: The payment comprises of the first month’s payment, down payment, a refundable security deposit, tax, registration fee, and any other possibly fees.

Finance: Finance includes the cash amount or a down payment, any applicable tax, vehicle registration fees, or any other payment.

Monthly Payments

Lease: the main favor of lease is that the payments are of a lower amount as compared to financing since you only pay for the vehicle depreciation during lease time, including interest, rent, tax, and any further fees.

Finance: Loan payments are comparatively more than lease amounts; this is because you are paying for possession of the car.

Vehicle Return

Lease: Once the term ends, you have a choice. It is up to you to either return the vehicle and walk away or buy it.

Finance: You pay for the vehicle, and the possession is yours. Its maintenance reselling is all your responsibility.

Early Termination

Lease: You can pay early termination fees in case you are in the circumstances of not paying the monthly charge. However, the amount is equivalent to the rest of the lease.

Finance: Selling or trading of the vehicle is possible as per your convenience, and the money after selling it is usable towards paying off the loan.


In a nutshell, your choice of leasing or financing the car is dependent on your long-term plan. If you feel comfortable having new vehicles after every few years, then leasing is a sound decision. On the other hand, if you should go for a loan if the car is intended to be an asset.

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