Cadillac Lease Deals: What’s Better – Loan or Lease?

November 13th, 2020 by

A happy couple is signing the paperwork on their Cadillac Lease Deal.

When it comes to purchasing a new vehicle of any kind, most people don’t have the luxury of paying cash in-full upfront. While it is most common to take out a loan to finance a new vehicle, did you know that you also have the option to lease? Cadillac lease deals here at Frank Kent Cadillac in Fort Worth are almost too good to pass up. However, we always recommend weighing the pros and cons or whether you should loan or lease. In this article, we will layout the ground rules for both payment options to help you determine which course is right for your lifestyle and budget.

What Is a Loan?

A loan is when you borrow money to pay for something expensive. In the automotive world, vehicle loans are often referred to as financing. This is the most common method of buying a new or used vehicle.

Financing allows you to pay for your new vehicle in installments. These installments are almost always monthly. For a luxury vehicle like a new Cadillac, these monthly payments can be quite hefty. However, you must first qualify for financing before you can be approved.

Most dealerships will accept a trade-in vehicle as a down payment. If you do not have a vehicle to trade-in, you will need to provide a down payment to reduce the monthly payments. We recommend $2,000 to $5,000 for luxury models. Keep in mind, the higher the down payment you can make, the lower your monthly payments will be.

What Is a Lease?

If you have ever rented an apartment, then you already know what a lease is. However, you might not be aware that the same concept applies to vehicles. You can lease a new Cadillac for a set amount of time. In general, leasing a new car costs less per month than financing one. You will be returning the vehicle once your lease expires, so you will never own this leased vehicle.

What Happens to Leased Vehicles?

Once your lease is up, you must return the vehicle to the dealership. Depending on the condition of the vehicle, it may go up for sale as a Certified Pre-Owned model. Another option is that it will be sold to a car rental company. Either way, you won’t have to worry about selling it. That’s the dealership’s job. You can lease another vehicle at this point or switch things up and buy/finance one.

A couple is walking down a row of vehicles.

Loan or Lease FAQs

Which one costs less up-front?

If you choose to buy/finance the vehicle, it will cost more up-front and in the long run. You will pay the full price initially or arrange to pay in installments. Financing a new vehicle will also end with you paying more than the sticker price due to monthly interest rates. You will also need to factor in sales tax, state/federal taxes, lender fees, and insurance. As long as the vehicle is under financing, you will need to keep full-coverage insurance. Once you have finished paying off the vehicle, you can switch to liability to save money.

On the other hand, leasing a vehicle will cost a bit less initially and in the long run. You will be responsible for fees, security deposits, full-coverage insurance, and the first month’s payment initially. You don’t have to worry about sales tax because you aren’t actually buying the vehicle; you are simply borrowing it for a while.

What kind of payments can be arranged?

As a luxury auto brand, Cadillacs are not cheap. If you plan on financing, the monthly payments will be higher for a couple of reasons. First, you are working towards paying for the vehicle entirely. Second, your monthly payments will include state taxes and other fees. The benefit to this is that you will own your vehicle once you’re finished making payments on it.

Meanwhile, leasing payments are a bit different. Yes, they are monthly. However, they are generally lower since you are only paying for the vehicle’s depreciation value. Depreciation is determined by measuring the vehicle’s market value over time. You will not be paying for the vehicle in full, and you will not be charged for state taxes or any other affiliated taxes/fees.

Are there any restrictions on loan or lease arrangements?

If you are leasing the vehicle, there are no restrictions about where you can take it within the United States. There might be some rules about transporting the vehicle outside the country, though. However, generally, you are free to drive as you wish. There are no penalties or mileage restrictions.

However, leasing a vehicle does come with some restrictions. Most lease deals do not permit you to move out-of-state while your lease is active. There is also a set maximum number of miles that you can put on a leased vehicle every year. If you go over the mileage limit, you will be charged additional fees when you turn the vehicle in at the end of your lease.

Two men are shaking hands at a dealership.

Is there a limit to natural wear and tear?

Wear and tear are normal in either case. However, there are some differences to take note of before you make a decision. When you finance a vehicle, there are no penalties for excessive wear and tear. It’s going to your vehicle, after all. You will have to deal with the depreciation if you ever want to sell it.

As for a leased vehicle, there is a limit to how much wear and tear is considered normal. You need to have routine maintenance done to the vehicle. We also recommend stopping by the mechanic before you turn the vehicle back into the dealership. The mechanic will let you know if everything is normal on your end. If you turn the leased vehicle back into the dealership with excessive wear and tear or significant damage, you will be charged for the repairs.

Do I need GAP coverage?

GAP coverage is an insurance clause that will cover the difference between the value of the vehicle and the remaining balance if disaster strikes. It is not required for vehicle loans; however, it is a good idea to have it just in case of total vehicle loss. Sometimes, full-coverage insurance isn’t enough to cover the value of a totaled luxury vehicle.

In the case of leasing, GAP coverage is generally included in the agreement. Make sure you read the agreement in full before signing it. If GAP coverage is not included, then we recommend purchasing. This way, if anything happens to the leased Cadillac, you will not be responsible for paying for it.

What happens at the end of the term?

If you are financing the vehicle, then you will own it outright when you have finished paying it off. It’s yours entirely. You can keep it, sell it, let you kid drive it, or do anything you want with it.

On the other hand, if you are leasing the vehicle, you must return it to the dealership at the end of the leasing term. Once you hand over the keys, you’re good to go. You may also purchase the car at the end of your lease if you want.

Current Cadillac Lease Deals

Here at Frank Kent Cadillac, we always have amazing lease deals available that will put you in a luxury vehicle at an affordable price. Get in touch with our team today to learn more about our current lease deals and financing plans.