by Emily Hechler 
At Alltru, we make getting an auto loan a fast and easy process. However, is an auto loan the right option for you? Is leasing a better option? What about two auto loans? This resource will help you consider some of the alternative options you can take with your car financing so you can get the most out of your car and money.
Leasing a car is different from buying a car. No method is inherently better than the other. It depends on your situation and what situation you want to be in now and in the future.
First, when you lease a car, you do not have ownership of the car when your term is up. You have to return it to the dealership. When you buy a car, you will have ownership of the car at the end of your term. At this point, you are free to keep it or sell it whenever you want.
Leasing a car generally costs less up front than buying a car. A common practice is to make a 20% down payment for a new car and 10% for a used car when buying a car. However, you usually don’t have to make a down payment to lease a car.
On the other hand, leasing a car will cost more monthly because there was no down payment up front. If you want to how your payments might vary if you have a car in mind already, visit our Purchase or Lease a Vehicle calculator.
When leasing a car, many choose to lease new vs used. This will guarantee you will be under the factory warranty for as long as possible. Factory warranties are granted for purchasing new cars too. However, when you lease a car, you are driving it during its most reliable years. A purchased car could start giving you trouble 5 or 6 years down the road.
You will have a limit on how many miles to drive when you lease a car. Exceeding your mileage limit results in high fees. However, if you have a short commute or only drive short distances, leasing could be a great option.
Finally, consider the long-term costs of leasing vs buying a car. When your lease term is up and you have to return the car, you’ll need to lease or buy another car. That means more monthly payments for the next few years. If you purchase a car instead and keep it well maintained, you can keep it running for ten plus years. This means your last several years of owning a car can potentially be payment-free!
If you’ve decided to purchase a car instead of leasing more than once, you might find yourself paying for two car loans at the same time. Have you considered refinancing your auto loans? There are several benefits to refinancing your loans. Plus, Alltru makes it easy!
Before we look at the benefits, note that these apply to you even if you only have one auto loan. It’s possible to refinance a single auto loan and save yourself money now or in the long run.
If you’re the person who has two auto loans, you can consolidate your loans into one, larger loan. This changes your payments from two smaller payments into one larger payment. It doesn’t matter where you bought your cars from or if you are currently financing from two institutions, Alltru can merge these loans into one easy payment at The Better Way to Bank.
First, you could receive a better APR (annual percentage rate) or interest rate on a refinanced loan. If you’ve been making your minimum monthly payments on time, your credit score has likely improved. This can help you secure a lower interest rate. Depending on how you refinance, you could make the same monthly payment except pay more toward the principle instead of the interest. Or, you could have a lower monthly payment where you pay the same toward the principle and less toward the interest.
If you have the means to pay more monthly toward your auto loan, you can shorten the length of your term. You can decrease your remaining term from 36 to 24 months. This will save you more on interest costs in the year that you are now car-payment free!
Did you have a cosigner when you bought your car? Refinancing a car can release them from the responsibility of being accountable for paying off your car in the case that you can’t make a payment. Let’s be real, the less people we have tied into our finances, the better. This is a step toward financial independence.
When I got married, I was going to refinance my car to remove my dad’s name from the title. When I called my bank, they were going to triple my APR! In my situation, it was more cost effective for me to make one large payment to pay off the loan entirely. I’m so glad that’s the decision I made. It can be possible for you too!
While these scenarios are encouraging, you might not be in a situation where you can reap the benefits. If you are struggling to make your monthly payments, you can refinance your loan to help.
You can refinance your auto loan to increase your length term. Doing this will result in lower monthly payments. However, this will result in you paying more toward interest over time too. If you need to refinance in order to make ends meet or give yourself more wiggle room in your budget, this can still be worth the switch.
No matter your financial situation, be careful to consider all the pros and cons before refinancing. It’s possible to become upside-down when you refinance. This means that you owe more toward your auto loan than what your car is actually worth. If you decide to sell your car while you are upside-down, you will owe the difference to your lender.
Since refinancing can be used to save you money, let’s look at other ways you can save money toward your cars.
First, consider the necessity of having two cars. Owning two cars might not be necessary if you are single since you can only drive one car at a time. If you and your partner own two cars between yourselves, the second one still might not be necessary. More remote jobs are becoming available, and yours may have even shifted to be remote since covid. You two may be able to get by without two cars for a while.
If two cars are necessary for your situation, talk to your car insurance company. Many companies offer discounts when you insure more than one car with them. They can also give you discounts for safe driving. Some agencies give you the option to make monthly payments or pay for six months of coverage at once. The six-month option will cost you more up front. However, the monthly payments likely total more than the six months at once option.
While you are still paying for two cars, consider carpooling when you can. If you and your partner drive the same direction to work around the same time, commute together to save on gas and wear and tear. If you live near a trusted coworker, take turns driving each week and watch each other save!
Speaking of wear and tear, do your own car maintenance. Many body shops are so expensive to go to because of the labor fees and not necessarily the needed car part. I was recently charged $800 for a small engine fix, but the piece cost less than $100! Doing this work at home would have cost me some time, but definitely not $700 worth of my time. While my situation is a little extreme, basic maintenance work such as oil changes and tire rotations are easy to learn. Plus, since these tasks regularly should be done, you can save significantly year over year.
No matter if you lease or own a car, being responsible for a car takes time and money. With these tips, you can be confident in your next financial decision. Whether you decide to lease for a few years before making a purchase or if you want to refinance your loans to help cut your costs, we’re here to help. Make an appointment online or visit us in a branch when you’re ready to take the next step.
