Lease or borrow? 5 tips to finance your new car

Lease or borrow for your car?

You want a new car, but you don’t want to spend (all) your savings on it. Then you have to take out a personal loan for the car or private lease. The best option depends on your situation. In this article we give you useful tips, so that you make the best choice.

1. Leasing pros and cons

The main advantage of leasing a car is that you drive a brand new car for a fixed amount per month. The premium of the car insurance, road tax and maintenance of the car are included in your monthly amount. So you only have to pay extra for refueling and any traffic fines.

But private lease, in addition to the fact that the car is not yours, also has one very big disadvantage: you are entering into a contract that you cannot just get out of. For example, if you become unemployed or get divorced, you usually cannot cancel the private lease. In addition, since April 2022 you can get a significantly lower mortgage get if you have a lease contract.

2. Advantages and disadvantages of borrowing money for your car

Borrowing money for your car means that you have to take out your car insurance yourself and pay for road tax and maintenance.

This also means that a loan for your car gives you more freedom than a private lease. Can you no longer pay the costs of the loan for whatever reason? Then you can always decide to sell the car and repay the loan. In addition, the car you buy with a loan is really yours from day one.

3. Leasing or borrowing and your situation

Because a leasing company insures many cars with the same insurer, they often receive an extra discount on the premium. As a result, car insurance that the lease company pays is always lower than if you take out car insurance for that car yourself. But in your lease amount you do not pay the car premium that the lease company pays specifically for you. The company charges an average amount that they pay in car premiums in your lease amount.

If you are young and have few claim-free years, you will benefit from this. Then it is often very expensive to take out car insurance yourself. That is why private leasing is almost always cheaper for a novice driver with few claim-free years.

However, if you have built up quite a few claim-free years and/or are older than 35, then your own car insurance is much cheaper. It is better to take out a loan for your car and arrange the insurance yourself.

4. Borrow or lease, also think of a new occasion

Buying a new car in the Netherlands is relatively expensive , but cars also quickly decrease in value in the first few years. This while cars are lasting longer and longer in good condition. If you now buy a car that is two or three years old, you pay considerably less than if you were to lease the same car new. This while the car is often as good as new after two or three years. Buying a car with a loan that has just been ‘finished’ is therefore a smart way to save money than with leasing.

5. Borrow for your car? Don’t pay too much!

In order to get out as cheaply as possible for your loan, we recommend a personal loan  to close. You pay a lower interest for this than for a revolving credit or financing through the dealer. In addition, with a personal loan, the interest, the monthly costs and the term are fixed at the start. This way you know exactly how much the loan will cost you and when you have paid it off.

If you opt for a personal loan, you still have a choice of different lenders. The differences in interest rates that they charge are large. The difference between the highest and lowest interest rate will quickly save you a few hundred euros on your total loan. Therefore, always first compare different loans and choose the lowest interest rate for your situation, so you never pay unnecessarily too much.