Car financing: leasing vs. a car loan?

Are you planning the purchase of a new or a used car, but your current financial buffer is too low for a cash advance? The two best ways to finance a new car are leasing or a car loan. We would like to show you the differences between both possibilities, we combine the costs, the advantages and disadvantages and we want to show you, which variant is the best for you.

Leasing: quick explanations

Leasing describes a modern, alternative form of financing for consumer and investment goods. Within a leasing contract, the leaseholder will determine for which monthly installments and additional maintenance costs the lessee is allowed to use the good. In this case, the leased object is the new car and remains the property of the leasing company within the entire term. You will be the user of the car, but not owner – the car is not yours and you are exclusively the user. Usually the banks of the vehicle manufacturers  submit lucrative leases. The interest rate and the monthly installment on a leasing contract is low, but there are additional costs to the monthly rate.

In addition to completing comprehensive insurance, you must pay a down payment in addition to a leasing contract. This can be up to 25% of the purchase price. The contract specifies the maturity, the interest rate, the resulting monthly rates and the provisional residual value. In addition to the leasing contract, the vehicle identification code is marked with code 178. This stands for the entry “holder replacement is forbidden by the law”.

After the runtime, you can “return” the car or you can buy it for the updated traffic value. Only after you have purchased the lease object for the value of the market you will become the owner of the car. If you wish to return the car after expiry of the lease term, you are usually obliged to repair any damage beforehand. Attention: This includes, for example, scratched rims, which cost several hundred francs a piece.

Calculation for a leasing example

You have decided to lease a car worth CHF 56,000.00. You want to use the vehicle for 3 years, the duration is therefore set to 36 months. As a rule a deposit of 25% is required. This deposit is then also the first rate. For the remaining installments you would pay CHF 552.84 per month. After 3 years you would have paid CHF 33’349.10. In order to be the owner of the car, however, you still have to pay the residual value of CHF 29’120.00. In this case, the total costs would amount to CHF 62’469.40.

Personal loans for the car – quick explanations

Apart from leasing, private loans are one of the most frequently used forms of financing. In doing so, a private loan can be used to finance not only the new car, but also private further education as well as the renovation in its own walls. There are many loan providers, who advertise with different interest rates. Therefore we recommend that you compare the interest rates of different providers before completing a loan agreement. Besides classic banks, there are online providers like us. We are an online platform, where investors can directly finance the loans of Swiss private individuals and small and medium-sized enterprises. We take over the role of a partner and link borrowers directly with investors. Our average interest rate for a car loan is 4.55% (term 36 months).

The leasing contract, like the loan agreement is forbidden if it leads to over-indebtedness

Calculation example for a car loan

Apart from leasing, where you have advance payment at the beginning and in the end, for a car loan you only pay the consistent monthly installments. The vehicle belongs directly to you and besides the monthly installments there are no other costs and obligations for you.

Leasing vs. loan: advantages and disadvantages

“I need a new car. As a financing option, I decided to opt for a car loan. For me, the most important reason was that I could withdraw the loan interest from the tax .” – Borrower from CreditGate24

Loan or Leasing: The costs

In a direct comparison, the monthly installments of leasing are less than in the case of a loan, but in order to become the owner of your car,  after the 3 years you have to pay a residual value of more than CHF 29,000. In the case of a loan the monthly installments are higher, but neither a down payment nor a residual amount of more than several thousand francs is necessary. After 3 years you have already repaid the full loan.

In addition to the so-called hard facts, the soft facts also play a decisive role in the overall view. For example, leasing costs are higher in insurance, repair and inspection costs, since these have to be carried out in a official garage. If you exceed the indicated kilometers, you will be charged for additional costs.

In comparison to this, you are more flexible with a car loan, and you can choose which insurance companies you can take and where you can carry out your inspections.

While the direct comparison of the total costs does not show a large difference, the monthly installments between leasing and a car loan shows a clear difference.

In our example, the monthly loan rate is about CHF 1,697. For the leasing variant, CHF 14,000 is required for the first installment. In the remaining months the load is significantly lower, but the final rate is twice as high as the down payment. In addition to these costs, insurance costs are mandatory for fully-fledged leasing. In the case of a loan, you can freely choose which insurance you prefer.

Our recommendation

Would you like to become the owner of your new car and decide flexibly how many kilometers and what insurance you would like to cover?

Then you are cheaper with a car loan. Because this is not always the case with leasing. Also a repayment is possible at the loan at any time and you are free when choosing your garage. In addition, you can take your loan as a debt as well as your interest rates for tax purposes and thus benefit from further advantages.

Calculate your monthly rate and apply for your car loan directly from your home. If you have any questions or uncertainties, please do not hesitate to contact our team by phone or e-mail.

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