Cash, Loan or Lease pros and cons

With a number of payment options being offered by dealerships and banks, many people now have the opportunity to own the car of their dreams. It may be easy for you to get lost in the excitement of owning a new car, and it’s important to research on the most convenient payment methods for you.

We look at the pros and cons of paying cash, getting a loan and leasing to get a car.

Pay Cash

The first method of payment you can consider is simply paying cash.


This method is much cheaper in the long run because you do not have to worry about paying monthly installments with interest. Another pro is that you do not have to deal with a load of paper work as everything is dealt with in one go.


The first disadvantage is that you have to pay the cash upfront. This may not be a very smart choice if you cannot afford it. Cars also tend to depreciate in value, so it may make more sense to buy an asset that appreciates in value, like a house, if you don’t already own one.


It’s the easiest and fastest way for you to buy a car if you can afford it.

Car Loan

The second mode of payment you can opt for is a car loan.


The costs are spread out over time in the form of monthly installments. Another advantage of taking a car loan is that you are able to compare what different banks offer, and you can choose what is most suitable for you. Other than that, they are considerably cheaper than dealership finance.


This mode of payment also has a number of disadvantages, one of them being that it’s really hard to get a loan if you have a poor credit rating. The final amount that you have to pay in the end may also be much more than the actual price of the car you intend to buy. In addition, you will have to deal with the car’s depreciating value, a problem that all car owners have to face. This may be frustrating if you consider all the money that you had to pay initially.


It is a more sensible option than paying cash as you can invest in other assets while paying for the car.


You could also opt to lease a car. This method has gained a lot of popularity, as you can hire a car for as long as you need it, then exchange it for a new one.


One advantage of leasing is that you pay low monthly installments, and the dealership usually services the car when necessary, thus reducing your maintenance costs.


In order for you to lease a car, you have to pay a huge deposit upfront, which is very costly if you keep exchanging cars. You should also note that it does not matter how long the car is leased out to you- it will never be yours. This may be a problem for people who like to solely own all their possessions. There is also a stipulated mileage limit on the car, and if surpassed, you may end up being penalized.


It’s convenient for people who like to have new cars periodically, but cannot afford to buy them but leasing is very expensive in the long run.

Other car financing options

Other popular modes of paying for a car include hire purchase and personal contract purchase (PCP). The first allows you to buy the car in installments, and after completing the payments you get to own the car. The second method allows you to hire a car for a fixed period of time, after which you have the option of buying a new car or exchanging it for a new one altogether. Both methods are convenient in the short run, but if you consider the long term costs, they are considerably more expensive than the ones mentioned above.

At the end of the day, we all have different abilities and requirements. Some don’t mind owning a car temporarily, as long as there is an option of switching every once in a while. Others prefer a more stable lifestyle and want to own a car permanently; in spite of how long and how much it will take.