Car Loan vs Car Leasing vs Car Subscription: Find Out the Differences!

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Let’s look at the comparison between car loan, car leasing and car subscription and try to find out which one of them makes more sense.

Car Loan vs Car Leasing vs Subscription

Nowadays, buying a car is becoming more of a necessity than a luxury. With abundance in several other transporting options, a car still remains the most popular and reliable. From an entry level hatchback to a luxury sedan, each buyer spends their hard-earned money and therefore, should be aware of the various options available while buying a car and which one is best suited for them. Let’s do a comparison of car loan vs car leasing vs car subscription and find out which is feasible.

Car Loan

Car Loan

A car loan is a financial product which helps the buyer to pay the amount of the car in instalments. Car loan has been around for quite sometime and has been the number one choice for people buying a new car. It is the tried and tested method but the buyer has to pay an initial down payment which is a big disadvantage of this financial model. Let’s talk about its advantages and disadvantages.

Advantages:

  • Financing a loan for your car will give you the ownership rights. This means, you have the liberty to modify your car in your own way without being answerable to anyone.
  • Financing a loan for your car will buy you an asset because you will have the ownership rights. You’ve bought an asset so you will also have a resale value.
  • Financing a loan for your car will get you a new vehicle. Unlike car subscription or leasing, you will get a brand-new car when you buy it through taking a loan.
  • Unlike car subscription or leasing, you will get full ownership rights of the car at the end of the loan period without paying any extra amount. This means, you own the car after the loan period ends.
  • There are no usage limits when you are financing your own car. All rights are reserved for you and you can use the car without any restrictions.

Disadvantages:

  • Probably the biggest disadvantage while financing a car is down payment. A large amount corresponding to the full amount has to be paid before buying a car.
  • You would be buying a depreciating asset. Even with full ownership rights, the value of your asset will depreciate with time and usage which will reduce the resale value of the car.
  • With full ownership rights, you have to maintain the car yourself. Along with the monthly instalments, you would have to bear the maintenance charges for the car.
  • The monthly instalments you pay after financing a car are generally higher when compared to leasing a car.

Car Leasing

Car Leasing

Leasing a car basically means that you would be allowed to drive the car over a limited tenure. The leasing company will provide you with the car of your choice but the ownership rights will remain with them and you would have to pay monthly rentals decided by them. Some leasing companies would require you to buy an insurance policy and some might include the cost in the rental agreement itself. Let’s talk about its advantages and disadvantages.

Advantages:

  • When you lease a car, maintenance charges, road tax and other recurring expenses are borne by the rental company.
  • While leasing a car, ownership rights are with the rental company so you won’t have to worry about the depreciating cost of the asset.
  • Unlike car loans, there is no need for down payment as you would be leasing the car.
  • The monthly payments are comparatively lower than financing a car. You can also avail a tax benefit if you are a small business owner, doctor, lawyer or have an option to buy a company car.

Disadvantages:

  • If you end your lease agreement prematurely, you might have to pay a penalty for the same.
  • The ownership rights are with the leasing company so you do not have the right to modify the car in any way.
  • You do not own the car after the tenure ends. You would have to pay a separate amount quoted by the company to get ownership rights.
  • There is a mileage limitation on leased cars which means you have to pay an extra fee for crossing that limit.

Car Subscription

Car Subscription

Car subscription is seldom used when a person needs a car for short period of time. It is solely focused on those who need a flexible option to drive a car for a short period of time according to their comfort and convenience. People are moving towards the concept of car subscription rapidly, so let’s find out its advantages and disadvantages.

Advantages:

  • With its flexible nature, you can own a car for as short as 1-2 months without bearing the burden of contracts and commitments.
  • Subscribing a car is the easiest way when compared with leasing and financing.
  • After the subscription ends, you can always shift to another car of your choice as the registration process is hassle free.
  • Just like leasing a car, there is no concept of down payment while subscribing a car.
  • Since car subscriptions work similarly to leasing a car, your credit score is not affected in any way because you are not applying for a loan.

Disadvantages:

  • Unlike financing or leasing, car subscription does not offer any option to own the car once the subscription comes to an end.
  • The ownership rights are with the company providing you with the vehicle. This means you do not have the right to modify the car is any way.
  • Apart from being a convenient option, the monthly cost for subscribing to a car is much higher when compared to leasing or financing.
  • Just like leasing, there are mileage restrictions while subscribing to a car as well.
  • Unlike leasing or financing a car, subscribed cars come with a commercial number plate adding to the cost of paying taxes while crossing state borders.
  • Car subscription services do not have a vast network as of yet and you may not get the car of your choice.

So these were the advantages & disadvantages and key differences between Car Loan, Car Leasing and Car Subscription. Read more such informative auto blogs on Car Jasoos.

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