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Auto Financing Made Easy: Loan vs Lease Options at Arrow Mitsubishi Abilene


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Financing Options

Whether you're in the market for a new or used vehicle, you don't need to pay for it all in cash. Typically, you have other options available, like financing the purchase with an auto loan or leasing the vehicle from the dealership.

In fact, according to a recent survey, only 38% of people purchased their last vehicle in cash. Financing and leasing remain popular options that help make car-buying more accessible to the average consumer.

However, deciding whether to lease or buy a vehicle takes some careful consideration. Both options offer distinct advantages and certain drawbacks, and neither is necessarily better or the "right" choice for all people. The best option depends on individual financial situations and driving habits, which we'll cover in more detail below to help you select the right choice for your needs.


Auto Loan Financing

Auto Loan Financing

One option is to take out an auto loan to finance the purchase. You can do so with dealership financing or direct lending through a bank, credit union, or other financial institution of your choosing.

With an auto loan, you borrow the necessary funds to cover the purchase amount, minus any down payment you make. You will pay back the loan over time with monthly payments plus interest. Until you fully pay off the loan, the lender holds the title to the vehicle, using the car as collateral.

The monthly payment amount depends on the amount borrowed, the APR, and the loan term, which tend to range from 68 to 72 months. In general, the longer the loan term, the lower the monthly payment; however, you'll end up paying more interest in the long run.

The Arrow Mitsubishi payment calculator can help you estimate your monthly payment for buying new or used cars in Abilene, TX.

Taking out an auto loan to finance a vehicle offers a few main advantages, such as:

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Full ownership: Once the auto loan is paid off, you have full ownership of the vehicle. You can trade in or sell the vehicle as you wish, and the car's value can go towards your next vehicle purchase.
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Maintenance flexibility: You won't be charged for any wear and tear, and you can follow your own maintenance routine.
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No mileage restrictions: Unlike a leased vehicle, there are no limits as to how many miles you can put on a car bought with an auto loan, making it an appealing option for those who frequently drive long distances.
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Customizability: When buying a vehicle with an auto loan, you have the ability to customize or modify the vehicle to your liking without any restrictions.

Despite the several benefits of auto loans, there are some considerations that consumers need to make before proceeding:

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Higher monthly payments: The monthly payments on an auto loan tend to be higher than the lease payment for the same car, as you're paying for the entire purchase price of the car plus financing fees.
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Vehicle depreciation: When you own a car rather than lease it, you're subject to the depreciation of the car's value as soon as you drive it off the lot, which tends to be about 10% on average, according to CNBC.
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Down payment: Even if you're not required to make a down payment on the auto loan, it's common practice to secure a lower monthly payment amount. Thus, you may end up fronting a portion of the purchase price right at the beginning.
Vehicle Leasing

Leasing a Vehicle

When leasing a vehicle, you make monthly installments to use the car over a predetermined period of time. You can think of it as renting a vehicle from the dealership rather than purchasing it outright.

Thus, instead of covering the entire purchase amount with a loan, you only pay for the vehicle's depreciation, or loss in value, over your lease term. At the end of the term, you return the vehicle to the dealership, where you can initiate a lease on a new vehicle or decide to purchase the car you've been using.

One of the key features of a car lease is that there are annual mileage limits, which often range from 10,000 to 15,000 per year over a 36-month term. There may be leases with higher mileage limits available, though these will typically come with a higher monthly payment.

Some people prefer to lease a vehicle for the distinct benefits this option offers, such as:

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Lower payments: Monthly payments on a leased vehicle are typically lower than a financed car, as you're only paying for the depreciation, without any interest or financing costs.
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No down payment: You typically don't have to put a down payment on it, which lowers the overall financial burden of driving a leased vehicle.
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Access to newer models: It's appealing to drivers who want access to the newest vehicles, as they can easily upgrade to the latest model as soon as the lease contract ends.
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Warranty coverage: Most leased vehicles will still be covered by the manufacturer's warranty, which could result in lower maintenance costs for major repairs.

Leasing a vehicle isn't always the right option for everyone. There are some potential drawbacks to consider for drivers taking this route:

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Mileage limits: Most vehicle lease agreements come with an annual mileage limit, which might be a limiting factor for those with long commutes or frequent travel over long distances. Driving over this limit could make you subject to overage fees.
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No ownership: At the end of a lease term, drivers can return the vehicle and swap it out for a new one or decide to purchase the vehicle outright. The payments made throughout the lease don't build equity or count toward ownership.
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Potential fees: Drivers may incur lease-end fees for excess wear and tear on the vehicle over their lease term. Any dings, dents, or scratches could be grounds for a penalty.

Key Differences: Loan vs. Lease

Choosing between leasing or buying a car is a big decision. To help guide you in the right direction, here's a side-by-side comparison of the biggest differences between the two options.

Feature Auto Loan Leasing
Ownership You become the owner once you've paid off the loan You're essentially paying to use the vehicle for a set period
Monthly Payment Typically higher Typically lower
Usage Flexibility No mileage limits or penalties for wear and tear Subject to mileage limits and wear and tear penalties
Customization Full customization freedom Limited to factory options
Long-Term Costs Responsible for all maintenance as the car ages Lower maintenance costs with newer models

Which Option Is Right for You?

Still not sure whether to lease or buy your next vehicle? Here's what we recommend based on your specific situation.

Long-term ownership

Long-term Ownership

Best option: Loan

If you plan to keep your vehicle for many years, financing with a loan allows you to build equity.

Lower payments

Lower Payments

Best option: Lease

For those who want lower monthly payments and prefer driving newer models.

Unpredictable driving

Unpredictable Driving

Best option: Loan

If your driving habits are unpredictable or you drive long distances regularly.

Minimal Miles

Minimal Miles

Best option: Lease

For those who drive fewer miles than the typical lease allowance (10,000-15,000 per year).

Financing Options at Arrow Mitsubishi

At Arrow Mitsubishi in Abilene, TX, we'll be your partner through every step of the car-buying journey. Our team will help you find the right lease or loan to fit your needs and budget on everything from a Mitsubishi Outlander PHEV to a Mitsubishi Mirage.

We have access to various lenders to help you find the most competitive rates, and we're proud to offer flexible Mitsubishi financing options whether you have perfect credit or not.

Drivers from Abilene, TX, to San Angelo, TX, can use our online pre-approval form to qualify for financing before coming in for a test drive. If you're located nearby, visit us for an in-person consultation to discuss our Mitsubishi finance programs or find the best Mitsubishi lease deal near you.

Choose Arrow for Life

Arrow Mitsubishi is the top Abilene car dealership for finding new and used vehicles at some of the lowest interest rates on the market. If you're looking for an affordable Mitsubishi in Midland, TX, or a nearby community, Arrow has finance options for everyone.

Visit your friendly Mitsubishi dealer today for expert guidance on selecting the right vehicle and financing options for you.