A Comprehensive Comparison between Car Loan and Leasing

Person who wrote the post admin Aug 28, 2018
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The Crowd4Cash has put together for you the most important points around the leasing and the car purchase with credit (car loan). We tried to look at the topic in the sense of an overview from all relevant points of view.

Legal classification when buying a car in Switzerland
When buying a vehicle with a loan, the legal situation is clear, since a loan and a purchase contract are concluded. The legal classification of leasing in Swiss law is controversial - The legal practice is based on a leasing agreement.

Ownership
The car purchase with a credit establishes ownership of the vehicle by the buyer. The car belongs to the buyer and he can fully enjoy it. While the lease goes over the property but the property remains with the seller. That is, the lessee has no power of disposition and cannot sell it legally.

Insurance
When car loan is the free choice of insurance. This can be interesting, especially for second-hand cars, since it is not necessary to take out a fully comprehensive insurance during the entire term. In the case of leasing, there is a general obligation to take out comprehensive insurance for the entire term, which is reflected in higher insurance premiums over the entire term.

Vehicle sales

One of the biggest advantages of car loans over leasing is the right to sell the vehicle at any time. In contrast to leasing, there is no entry 178 in the vehicle ID card (holder change prohibited), since the purchase passes through the property fully. Thus, it is possible for you to sell the car at any time in changing circumstances and pay back with the proceeds of the loan at no extra cost.

When leasing a sale is generally not possible.

Funding
Deposit / monthly payments
When buying a car via credit is no deposit, but the rates are slightly higher. For leasing a deposit may be required. Together with the residual value, lower monthly installments may result. The car loan is repaid over time until the car is completely paid off at the end of the term. There is a purchase option for leasing, which usually corresponds approximately to the residual value.

Early repayment
With the car loan an early repayment is possible at any time and without additional costs. If you want to get out of a loan agreement as a lessee, there are usually high exit costs. Depending on the situation, these sometimes high payments can lead to a debt beyond the ownership of the car. The financial risk of a premature leasing exit is fully borne by the borrowers.

Annual mileage
When buying a car and the associated property through a loan, you can complete an unlimited number of kilometers. This does not affect your financing costs. When leasing the annual number of kilometers are fixed contractually. Exceeding this may lead to an adjustment of the residual value and thus significant additional costs at the end of the term.

Tax impact
With car loan, a full deduction of the loan interest from your income tax is possible. Since leasing is a kind of rent, this is not possible.

What's cheaper: lease or credit?
We have calculated a cost comparison between leasing and car loan for you.
Assumptions: New cars for a purchase price of CHF 30'000.-  with a residual value of CHF 12'000.- after 48 months. The financing amount for the lease is therefore CHF 18'000.-.

 

 

Leasing*

Car loan

Loan amount

-

30’840.-

Duration in months

48

48

Interest rate

4.9%

5.9%

Monthly repayment

CHF 458.90

CHF 722.22

Total cost of installments

CHF 22'027

CHF 34’698

Additional costs insurance *

+ 804

 

Total costs including vehicle takeover, in francs **

CHF 34'831

CHF 34’698

* Source Comparis
** if the car is taken over

Risk
Due to the repurchase value with a fixed agreed number of km, an increased use can be very expensive. In addition, if the leasing contract is prematurely terminated, the lessors require a replacement for early repayment (prepayment penalty). With the loan, the constant monthly rate can be clearly calculated right from the start and the amount can be repaid at any time. There is no risk of additional costs.

Conclusion
Although car loan enjoys significant advantages over car leasing, the individual situation is crucial. However, the Crowd4Cash team believes that the benefits of loan finance outweigh. With the low interest rates of Crowd4Cash, the leasing pays off financially in a few cases and the limitation of the flexibility associated with leasing is great.

 Here you can apply for your car loan directly online. We are happy to help you with questions about your loan application.