Credit VS Leasing - Differences and advantages

Okay, so you're thinking of buying a new car. That's awesome news! Let's see what we can do for you. 😊

Whether your mind is set on a hybrid or an electric car, or a car that has an automatic or a six-speed manual transmission. Whether you want 4WD or not, you need to think about how you're going to pay for it. And if you've already decided you want to pay by instalments, we've got some options. 

Car loan, personal loan or leasing? Well, if you're still not sure what the differences and advantages of each option are, we'll split the difference into four and you choose the right option for you.

Who is the owner?

Ownership is, in fact, the major difference between the three financial products. When it comes to leasingthe owner of the car is the leasing company from the beginning to the end of the contract, and you are actually the user of the car, so the right of use is transferred to you. In other words, you lease the car for the duration of the contract, and at the end, if you are happy with the chosen car, you can choose one of the following options: either buy it, extend the lease, or return the car and stop paying the residual value. 

❗ Tips&Tricks: If you're thinking of returning your car, the best part is that this way you can change your car much easier depending on your long-term needs 😊. Basically, you return it and get another one, tailored exactly to your personality. 

On the other hand, in the case of loans, the job becomes even easier. Whether we're talking about car credit or personal loansyou are the owner of the car from the first day you sign the contract, and the loan is paid back exactly as you are used to, in monthly instalments.

What advance do I need?

Speaking of money, we hope you've put some aside because in the case of finance leasing the down payment starts at a minimum of 20% of the total value of the car. But don't panic, look at this down payment as an investment for one simple reason: it reduces the amount of the loan you'll be paying interest on. Yes, it's a little harder at first, but in the long run you'll be better off. 

With car loans this down payment decreases, but not by much, because the minimum percentage is 15% of the total amount of the loan requested, the advantage being that you can pay it directly to the seller. 

Clearly, for the above two options it is good to save up in advance, but if you are still in a hurry and don't want to wait until the amount has been collected, we have another option that is right for you: personal loan. Pssst! It comes with zero down payment!

However, what if I want to pay off the loan early?

Then it's worth thinking about repayment. Early repayment is different depending on the financial product you opt for. Therefore, with car leasing, partial early repayments can be made whenever you want, but for full early repayment you will have to wait 12 months from the start date of the contract. 

In the case of a loan, repayment is always within your reach, all you need to do is to have the necessary money in your account and have no arrears. By the way, don't forget to let us know that you want to close your credit, you do this by visiting any of our agenciesby filling in an application for early repayment. Quickly, we further process your request and in a few days you get rid of your credit.

We all owe insurance, right?

Of course! This is why it is important to know from the beginning that the leasing company will insure the car by taking out CASCO and RCA policies. Even if the cost of insurance will be your responsibility, the major advantage is that you will benefit from the preferential rates of the leasing company and in the end, you will have less to pay. 

In the case of credit products, it is good to know that, with the car loan, the car is insured FULL CASCO, because the car, together with the policy taken out will become collateral for the entire loan period. 

With personal loans, it gets even easier. You're only obliged to take out the MTPL, by law, but it would be a shame not to insure your new purchase in every respect, wouldn't it? 😉

How soon can I have the car?

In no time, if it's leasing. Basically the approval process takes at most 2 days, and then you can come for the car 🚗. 

For car loans, the situation is a bit more complicated because even if the approval process itself is a short one, the bureaucratic part intervenes with steps such as: the CASCO policy, the establishment of the pledge on the car, the transfer of money to the seller's account.

The personal needs credit here will surprise you. Basically, it's so fast you'll find yourself with money in your account because the approval process takes a few days, and then you do what you want with your money. 

Whichever financial product is right for you, it's best to have a broad overview of financial products, so don't forget to take a look at the figures. Here's where we've prepared your calculators for car credit, personal loan and leasing.

We wish you the best of luck in choosing the perfect car for you, and if it comes to financing we are here to support you!

Editor: Mihaela Ban, Communication & PR Officer, Banca Transilvania