If you can afford to buy, run, and maintain a car, you’re lucky. But if you aren’t, you still have several options, including loans/financing, car rentals, and leasing.

While there’s no one-size-fits-all answer to the question of whether financing is better or leasing, it’s important to keep yourself informed about your options so that you know how to choose between financing and leasing a vehicle.

Buying vs. leasing – Which one’s better?
There’s no definitive answer to the buying vs. leasing question, because it all boils down to your unique circumstances, needs, priorities, preferences, and budget. Leasing is certainly lighter on the pocket as it rarely requires a down-payment requirement. This means you don’t lock up a large sum of money that you could use elsewhere. If you finance a car, on the other hand, remember that loan rates can be higher than leasing rates, and you’re building zero equity with a loan. Taxes, maintenance, and other fees are taken care of by the company, and you get to drive a brand-new model with a renewal.

Lease or purchase – How to make a choice?
There are five major factors that you need to take into account when wondering how to choose between financing and leasing a vehicle:

• Analyze your needs : Before you make the final decision, examine your priorities. What kind of vehicle do you need? Is it the primary one in your family, one that’s used occasionally, or driven by teenagers/seniors? Will you make long-distance trips, or do you need it for commute within the city?
• Budget: The decision hinges on your short-, medium- and long-term financial capacity. Auto-loan payments need to be factored into your monthly expenses, and you should also consider depreciation. With leasing, you don’t have to worry about this if you plan to purchase the vehicle at the end of the lease term, as you could get it at the depreciated value. The down/monthly payments are also usually lower in leasing as compared to financing.
• Frequent changes : If you’re the kind of person who loves to drive a shiny, new, state-of-the-art model every 3-4 years, leasing is the right choice for you. Upgrades and the latest tech and safety features are available in cars offered on lease without you needing to spend a lot.
• Taxes and maintenance: When purchasing a vehicle, you’re fully responsible for the payment of taxes and ensuring that the vehicle is kept in top gear at all times. This is something you don’t have to worry about when leasing a vehicle, as these responsibilities lie with the owner. If you’ve leased a vehicle for business purposes, you can write off a big chunk of taxes based on the state in which you live, but remember to keep to the lease contract’s maintenance schedule.
• Mileage and end-of-lease : With leasing, you’re bound to mileage restrictions and need to return the car in good condition to avoid penalties. This factor to consider when wondering how to choose between financing and leasing a vehicle can be tough to stick to if you have kids, pets, or both.