Don’t feel bad if you aren’t quite sure, I was totally ignorant of this one before I started working in auto finance.
Here are the basic definitions:
Lease: a rental contract of a car for a set period of time, usually 2-4 years, where you have to either give the car back at the end of the term or buy it.
Loan: financing for the purchase of a vehicle, where you own the vehicle outright at the end of your contracted payments.
So far so good, right?
Now, where it can get confusing is that some people who intend to buy a car end up with a lease instead.
There are a lot of reasons for this, but the most common one I saw is that either the buyer flat out doesn’t qualify for financing on a loan for the car they want, or they want their payments to be lower.
Leasing first can be a good fix for both of these issues because you’re basically financing less car, which means it’s both easier to get approved and often possible to get a lower monthly payment.
It’s the end of the lease term that can be an issue if you aren’t on your game.
It’s pretty common to finance a leased vehicle into a loan, but sometimes it’s not possible to get your loan payments as low as your lease payments. What then?
Or what if something happened during your lease and your credit score isn’t as good as it was when you first leased the vehicle?
I’ll talk about those 2 scenarios in later posts, but it’s definitely something to think about if you are planning to buy your car after the lease is up.
Tips from an Auto Finance Specialist 