Financing Vs Leasing a Mazda


While most car buyers choose to finance their vehicle purchases, an increasing number of people are gravitating towards leasing. If you're trying to decide between getting a loan or a lease to drive home your new car, you need to know how each option works. Check out this comprehensive guide to understand the differences between financing and leasing.

What Are the Differences Between Auto Financing and Leasing?

Auto financing involves taking out a loan to fund the purchase of a vehicle. Typically, you need to make a down payment first and then borrow money from a lender to cover the remaining cost of the car. To repay the amount you owe, you have to pay monthly installments plus interest to the lender throughout the course of the loan. If you successfully fulfill your loan obligations, you'll own the vehicle outright. On the other hand, if you fail to pay off your loan, your lender is allowed to seize your car.

With leasing, you won't become the owner of the vehicle at the end of the agreement. Instead, you're paying a monthly fee for the right to use the car, which is similar to renting. Often, a lease provider will give you the option to purchase the vehicle when your lease ends. It's important to note that a car lease typically requires you to stay within a certain mileage limit and keep the vehicle in good condition.

2021 Mazda CX-5: A Real-World Comparison Between Financing and Leasing

Let's look at a real-world example to understand how financing and leasing differ in terms of monthly costs. Suppose you want to get a 2021 Mazda CX-5 Sport with all-wheel drive from Schwartz Mazda. The manufacturer suggested retail price (MSRP) for this particular SUV is $27,770. Let's say you qualify for our affiliate offer and military offer, each of which provides a discount of $500. This reduces the price of the vehicle to $26,770. The down payment amounts and the terms of the agreements are as follow:
  • Financing: Upon approval of your auto loan, you need to pay back the amount you borrow at an interest rate of 5% over the course of 60 months. You make a down payment of $5,000, and you don't have a vehicle to trade in.
  • Leasing: You decide to lease the vehicle for 36 months and pay $4,299 upfront.
In this hypothetical situation, the amount you need to pay every month varies significantly depending on whether you choose to finance or lease the Mazda CX-5 Sport. The following is a comparison of the monthly payments for financing and leasing:
  • Financing: If you end up taking out an auto loan to purchase your new Mazda CX-5, you have to pay your lender $410.83 per month.
  • Leasing: At Schwartz Mazda, you can get a Mazda CX-5 lease special that comes with a monthly payment of only $149.
In this example, you can see that the monthly cost of leasing a 2021 Mazda CX-5 Sport is much lower compared to getting a car loan. This stark difference is one of the main reasons why leasing is gaining popularity among American drivers.

Pros and Cons of Leasing a Vehicle

While an auto lease often comes with more affordable monthly payments, it may not be the best option for everybody. Let's take a look at the pros and cons of leasing a vehicle to determine if it's the right move for you.

Pros:

  • Lower monthly payments: If you want to keep your monthly expenses low, it's a good idea to lease a vehicle. As discussed above, the monthly cost of an auto lease can be considerably less than that of a car loan. If you have enough room in your budget, you can opt for a more upscale vehicle than you could otherwise afford.
  • Minimal repair costs: Many new vehicles come with a manufacturer's warranty that lasts for three years or more. Therefore, if you get a three-year lease, the warranty will cover all or most repairs, which can potentially help you save a lot of money. However, you have to regularly bring the vehicle to a service center for maintenance to ensure it stays in good condition.
  • New vehicle every few years: When your lease is up, you can get another vehicle and enjoy a whole new driving experience. Driving a new car every few years enables you to use the most advanced automotive technologies, such as new tech features and driver-assistance systems.
  • No resale worries: If you lease a vehicle, you don't have to go through the hassle of selling a car. All you need to do is return the vehicle to the lease provider and pay any lease-end fees.

Cons:

  • No ownership: When your lease is over, you may lease another vehicle or buy one. Either way, you'll have to make monthly payments for a long time. On the other hand, if you finance a car, you'll own it after you pay off your loan and drive it payment-free. Also, owning a car allows you to trade it in when you want to get a new one, which can substantially reduce the purchase price.
  • Limited mileage: Typically, a lease comes with a driving limit of 10,000 to 15,000 miles per year. If you live far away from your workplace or enjoy going on road trips, you'll likely exceed this limit, which can result in additional charges.
  • No customizations: At the end of your lease, you have to return the vehicle in the same configuration and condition as you received it. This means you aren't allowed to modify any part of the car. If you intend to customize your new vehicle with a new paint job or spoiler, then you should choose financing instead of leasing.
Overall, you should consider leasing a vehicle if you have a tight monthly budget and like the idea of driving a new car every few years. However, you may be better off with an auto loan if you want to be able to own a vehicle and drive it without restrictions. Contact us to speak with our finance experts if you need help deciding between financing and leasing.