Buy with a Loan vs. Taking the Wheel with a Lease - What's the Difference?

Q: What is an auto loan? What does it mean to finance with one?

Auto loans are pretty different than leases; it involves taking a loan (borrowing money) from a financial lender, which can be your local bank or through our financial services. You then use that loan to pay for the total cost of your new Cadillac. Thereafter, your monthly payments will represent the initial loan (principal) and any interest associated with it.

Q: Okay, so what does it mean to lease a Cadillac, then?

When you lease your Cadillac you're entering into a short-term contract with us, the dealership! Most leases run somewhere in the neighborhood of three to five years. The lease agreement allows you to take possession of the vehicle for a set amount of time, for a set amount of money. It's worth noting that most lease contracts are more complicated than that - but we'll get to the nuances in a second.

Q: What are the benefits and drawbacks?

There are actually a number of meaningful differences between buying with a loan and leasing a new Cadillac car, crossover, or SUV. What's an advantage for someone might be a negative to you, so here is how they differ meaningfully:

• With leases, you don't own the vehicle, but your monthly payments grant you possession of the vehicle for the course of your contract. Some people prefer the freedom this allows them, but it also means you can't sell your vehicle or build equity, as one can when they purchase a vehicle with a loan.
• In terms of monthly payments, leasing payments are often lower than financing payments for the same vehicle. The reason for this is, leasing monthly payments are based on the depreciation of the vehicle while in your possession, but on the other side of the coin, monthly financing payments go toward the overall price of the vehicle, covering the principal of the loan and any interest associated with it.
• One difference between payments: lease payments don't build equity, but you can build equity in a vehicle you own.
• If you aren't one for rules, a lease may not be ideal. With leasing, you get lease terms; you're not able to customize your vehicle because of them, and they often stipulate a maintenance schedule as well as mileage limits; with a loan, it's up to you whether you want to customize or personalize your vehicle, you don't have to stick to a maintenance schedule, and you're welcome to drive as far and wide as you like - no mileage cap.
• Another one for those no-strings-attached folks: when you lease, you get to return your vehicle to the dealership at the end of the lease (or before the end, with a fee); by contrast, there's no "return period" with a vehicle you've purchased, but there is a caveat: you can always sell a vehicle you own, but you can't sell a vehicle you've leased.

Barkley Cadillac

3575 Skyland Boulevard East, Tuscaloosa, AL 35405