Are you standing in front of a car purchase and wondering whether you should take out a lease or raise the required capital with a car loan? This question is justified. Although leasing may be tempting at first glance, a closer look reveals a few points that speak in favor of a loan for car financing.
Leasing offers – the devil is in the details
Whether it is the first own car, the station wagon when starting a family, or the sleek second car: buying a car is one of the biggest expenses. Often one finishes out one’s financial limit for one’s own vehicle. It’s not just about the possibility of transportation, but often also about status, an investment or a hobby. The costs for this are skyrocketing, especially if you give something to quality and durability. The handle in the pocket can quickly get deep.
So it is all the better that automobile manufacturers anticipate you with great offers. With fabulous rates and easy access, they lure you to sign a leasing contract. Or is there supposedly a catch?
Clarification of the term “leasing”
The term leasing stands for a transfer of use, in which there is a contractual triangular relationship between:
- car users
- finance company
- Seller (usually the car dealer or garage)
The lease contract is then a special type of lease. The car user gains ownership of the vehicle and thus the right to use it. However, the finance company remains the owner for the entire duration.
Here you will find more information about leasing
With the attractive leasing offers it is important to be careful! What appears simple and sensible at first glance can cost you more than expected.
This starts with the full cost calculation: A detailed comparison of the total costs over the entire holding period often shows that these are considerably less with a car loan than with leasing.
Car loans – often the cheaper alternative
In addition to the general cost savings that full-cost accounting often brings to light, car financing through crowdlending offers other advantages that can save money.
In most cases, fully comprehensive insurance is mandatory for leasing contracts. In contrast, as the owner of the vehicle (who you become when you buy the vehicle), you have the choice of which insurance package you choose. If liability is sufficient for you, this is easily possible. The additional financial burden is correspondingly lower.
Tax savings through loan interest
Another factor that affects the amount of the total cost is tax-deductible loan interest. In contrast to the monthly leasing installments, loan interest payments can be deducted from earnings at the end of the year, thus reducing taxable income.
You can find out more about this in our blog post on taking tax interest into account – how it works ”
Additional costs may also arise at the end of the lease. If the vehicle was used above the contractually specified values, i.e. more kilometers were driven than initially specified, this usually has to be paid for expensively.
Last but not least, a car loan gives you the opportunity to pay the vehicle directly to the dealer in cash. This is regularly rewarded with better conditions. This is not possible with leasing.
For private individuals, the following applies: create clarity
Taking out a personal loan to purchase a vehicle may seem more complicated at first. In addition, there are reasons for commercial customers to choose leasing.
However, these do not apply to private individuals. And: thanks to modern and customer-centered processes, loan applications can now be applied for with little effort.