When looking into auto financing, you will find two main ways to fund your car, the lease and the loan. Traditionally, the loan is the more common method of auto financing, but for some, a lease is a better option. Read on to find out whether a lease or a loan is the best way for you to finance your automobile.
Getting a lease is basically renting your car instead of buying it outright. Instead of paying the entire cost of the car, you pay the difference between the showroom value of the car, and what the dealer thinks it will be worth when you bring it back.

This method of auto financing can save you money on depreciation and allow you to always have the most recent model of car. Monthly payments will also be lower if your means of auto financing is a lease, since you are not paying the full price of the car. Despite all these benefits to auto financing with a lease, leases are not for everyone. If most of the following criteria apply to you, you may want to consider auto financing via lease.

1) You like always having a new car.
2) You do not put an excessive amount of miles on your car
3) You treat your car extremely well.
4) You do not plan to keep this car very long.
5) You use your car for business (you can deduct both depreciation and interest from your taxes).
6) You don't want to pay very much down for your car.

A lease is not your best method of auto financing if:

1) You tend to be hard on cars.
2) You don't know how long you want to own your car.
3) You drive a lot.
4) You don't feel the need to constantly have a new car.
5) You have poor credit (leases are even harder to get with bad credit than car loans).

Leasing is generally a more expensive method of auto financing overall. You don't build up equity, but have perpetual car payments. However, if you regularly buy new cars, a lease is a great way of auto financing that will allow you to constantly have a new car without the hassle of selling the old one. If you don't want your car for very long, this could be your best means of auto financing.

Auto financing with a lease is, however, not without its risks, and if you take this route be sure you are well informed. There are many different kinds of lease fraud, also, there may be steep penalties for early return. Unfortunately, the dealer will likely charge you extra if you drive extra miles, and another possibility is that your insurance may not cover theft or accident for a leased vehicle. When auto financing by lease, know all the terms of your lease to avoid unpleasant surprises.

If you choose to finance through a loan instead, consider auto financing with a home equity loan, or line of credit. Their rates are often lower than most other options. If you are not a home owner, auto financing through credit unions or banks is another possibility. Usually they will give you a better rate than the dealer, unless the dealer cuts you an especially good deal on your auto financing. A final tip for auto financing: comparison shop. Before buying your auto, compare the rates of auto financing with different businesses. The time it takes is well worth the money you'll save by getting a lower interest rate.