Car loan vs Car lease: All you need to know

• Car leasing is a new method of car ownership without the hassle of maintenance or down payment • Car leasing helps save money in short term, while car loan is better for long term • Here are all the differences between Car Lease and Car Loan

Car loan vs Car lease: All you need to know

In the last few blogs, we have told you the benefits of car loan and also provided tips to save money when availing car finance. But did you know car loan is not the only method of car finance available when buying a new car?

Read This: Features and Benefits of Car Loan From CarLelo

In the recent past, many OEM’s have adopted a new car buying solution into their business model called as car leasing. While it may sound similar to car loans, car lease are two different things, and involve completely different cost structure. It is important that to understand the difference before you decide on which one is right for you.

There are advantages and disadvantages to both, and you should weigh all your options before deciding. In this blog, we’ll explore the difference between car loan vs car lease to help you make a better decision when you plan to buy new car.

Here are all the differences, advantages and disadvantages of car loans and car lease

What are Car Loans?

A car loan is a financing method in which you borrow a set sum from either a bank or any other financial institution to buy a car. This system comes with a commitment period throughout which you will make monthly payments to clear off the debt received with interest.

Pros & COns


If you buy a car loan, you own the car outright once it's paid off. That means you can sell it or trade it whenever you want. You're also not restricted in terms of mileage or modifications. 


On the downside, loans typically have higher interest rates than leases, so they can end up costing more in the long run.

Read Also: The Ultimate Guide: Car Loans & Best Car Loan Providers

What is Car Leasing?

Car leasing is when you agree to pay money based on the usage of the vehicle over a set period of time, typically 2/3/4 years. You make monthly payments during the lease term and have the option to buy the car at the end of the lease for a predetermined price.

Some companies that offer car leases in India are Avis Budget, ALD Automotive, Orix India and Lease Plan


Leases generally have lower monthly payments than loans, since you're only paying for a portion of the vehicle's value over the lease tenure. Apart from that, many manufacturers also offer free service during the tenure of your lease, making owning a car easier. The other advantage is that you can get a new car every few years without having to deal with the hassle and expense of selling your old one.


On the downside, you never actually own the car when you lease it, so you are always restricted during the usage. Insurance companies tend to charge a higher cost for renewing a leased car as compared to a loaned car making ownership more expensive in the long run. Also, if you exceed your mileage allowance or damage the car during the lease tenure, the manufacturer can impose a hefty fine at the end of your tenure.

Car Loan Vs Car Lease: Which is better for you?

Better for you

Consider your budget and what kind of monthly payments you can afford. If you have a limited budget, then leasing may be the better option for you since it generally has lower monthly payments than financing a vehicle.

Also consider how long you want to keep the vehicle. If you plan on keeping it for several years, then financing may be the better option so that you can eventually own the car outright. However, if you only need the car for a short period of time, then leasing could be the way forward foe you as you can return the vehicle at the end of its tenure and be free of any worries.

Finally, consider your driving habits. If you typically put a lot of miles on your car each year or if you tend to drive in rough conditions, then financing may be the better option since most leases have mileage limits and charge extra fees for excessive wear and tear.

So which option is right for you? It depends on your personal circumstances and driving habits. If you want to save yourself from the hassle of down payment, service cost and also enjoy the perk of changing cars every few years, then car leasing is the best option. But if you want to keep your car for a longer time and build an asset around it, then car loan is the way ahead for you.

Read Also: How A Car Loan Can Help You Buy Your Dream New Car

Call Now