What you need to know about car financing, the LOA of a new or used vehicle

Have you heard of car leasing with an option to purchase (LOA) and want to know more? Discover through this article everything about car financing formulas.

 What are the differences between financing a vehicle by LOA, LLD, or car loan?

Are you hesitating between buying or lending a new private car? Car credit, leasing, long-term rental, and LOA are methods of car financing. Indeed, this allows you to have a new or used private car. You can also adapt the reimbursement according to your budget. When the LOA contract comes to an end, the customer can buy the car if he wishes.

Is the LOA interesting with its long-term purchase option?

The LOA is interesting if you plan to buy the vehicle from the dealership or the bank. The contract sets the rental period, the security deposits, the number, and the amount of the rent. At the end of the contract, the reimbursement of security deposits is possible. The motorist is therefore a potential buyer even if the purchase remains an option.

Is auto credit advantageous for buying a new vehicle?

If you want to immediately become the owner of the vehicle, opt for classic credit. As part of a rental with the option to buy, you are first and foremost a tenant. Then you become the owner if you plan to buy the vehicle after the lease.

What does the LLD or LOA (car leasing) offer the buyer?

The LOA offers the possibility of acquiring the vehicle at the end of the contract. But this option is impossible for long-term rental (LLD). Thus, it is a good compromise to have a new vehicle to rent every month. In addition, you free yourself from maintenance constraints. The LLD assures paying monthly installments (with or without contribution ) including maintenance costs. It is up to the lessor to take care of the maintenance inherent in the vehicle.

Is the LOA more interesting for the tenant (total cost, monthly payment, excess mileage, maintenance costs, etc.)?

Are you about to sign a contract? It is better to know more about the pitfalls of renting with an option to buy. The “pitfalls” associated with the LOA generally come from the ignorance of the clauses binding the tenant and the lessor. Before opting for LOA financing, you should weigh the pros and cons.

How to calculate if the LOA is more interesting?

Ask the lessor to calculate whether an LOA and a classic loan, of equal duration, give the same results. Thus, you will know if the LOA is advantageous to you. Indeed, different parameters come into play when calculating the monthly payment.

The rate applied and the personal contribution to buy or rent a car

The rate applied by professional lessors determines the total cost of financing. A classic car loan can then become more advantageous. Regarding the LOA, you can add a personal contribution. Propose the trade-in of your old model to the car manufacturer, the bank, or the dealership. This will reduce the rental amount of the lease. However, the rental company must agree to adapt to your possibilities or your proposal.

Excess mileage on car leasing: financial loss?

In LLD financing as in LOA, the driver is required to respect a specific mileage package. If the mileage is exceeded, the driver must pay penalties for driving more. In other words, the extra kilometers can become a real financial loss. The LOA is therefore a solution for short trips in town and a concern for the big wheeler. On average, the authorized mileage is approximately 15,000 km per year in LLD and LOA.

The cost of repairing the vehicle at the end of the LOA

At the end of the LOA, you have the choice between acquiring and returning the new or used vehicle. In both cases, the LOA implies a repair of the vehicle if you wish to return it. The repair costs related to the repair of:

– some scratches;

– traces of shock;

– shoot.

Replacement of engine parts is also possible. If the vehicle has a lot of damage, it can cause financial worries.

Which is better: leasing or buying?

The purchase of a vehicle is less expensive in its entirety. By taking a classic loan as financing, you must pay monthly installments to the financing institution.

For example, a 36-month LOA is more attractive than a car loan of the same duration. Indeed, the monthly payments of a classic loan are more expensive. For a lease, the monthly payments are less expensive, but the total cost is higher.

Can two LOA contracts for a vehicle be linked together?

The LOA offers certain advantages. Subscribe to another new car rental agreement more easily. Indeed, the value of the new contract is calculated according to the remaining monthly payments due on your current vehicle.

What are the advantages of LOA leasing a new car?

Admittedly, the pitfalls of renting with an option to buy seem numerous. However, car leasing has several advantages:

• Knowing the monthly payments even before signing the LOA contract. This has the effect of mitigating the unpleasant surprises that could thwart your purchase project;
• No obligation to buy or resell. The tenant can become the owner if he wishes. This is why the LOA has the wind in its sails;
• Question of flexibility, the leasing contract LOA adapts in terms of duration, use, or mileage;
• The possibility of including a vehicle maintenance contract to avoid necessary repairs;
• Legal freedom: the vehicle remains the property of the lessor. Therefore, all papers, including the gray card, are in his name. Thus, seizure of the car is impossible;
• Take advantage of the choice of vehicle among several brands and families of cars (coupé, sporty, pick-up, station wagon, sedan, etc.).

When to take a new LOA?

After the first 12 months, it is possible to buy back the car on lease or return it. You now know the pitfalls of LOA financing, the difference between the LLD loan and the car loan.