Car is an expensive item and you have to spend a lump sum amount to buy it. Usually, people do not have enough savings to pay for it. If you start saving for it, you will have to wait for many years before you could sit behind steering wheel. Besides, you will have to make a lot of compromises. You will have to cut down your other expenses to save for your car.

If you do not want to pay a lump sum amount, you can get a car on lease. In this case, all you need to do is to pay monthly lease rentals. In a lease agreement, you can use a car but do not own it. At the end of a stipulated period, you have to return the car to the car dealer. Therefore, you might consider it a waste of money.

Another option is to obtain a car loan. This will help you buy your dream car. You can repay the loan over a long period of time, usually 3 to 5 years. You can use your car during all these years and you do not have to return it at the end of the loan period. The loan tenure and the amount of monthly installments are adjusted according to your financial position and repayment ability.

Some of the advantages of getting a car on lease and buying a car on a car loan have already been discussed. There are certain disadvantages as well. If you get a car on a lease, you will see your money going down the drain. The amount of monthly lease rentals may be small but at the end of the lease tenure, you will have spent a large sum of money for nothing. You do not even retain the car that you have been using.

Buying a car on a car loan is also detrimental to your personal net worth. The rate of depreciation of cars is very high. By the time your loan period expires, your car will have depreciated significantly. The best way to avoid it is to buy a slightly older car in good condition. The rate of depreciation of cars is high in the beginning. A used car does not depreciate as fast as a new car does.