Understanding the Difference Between Leases and Loans

December 30th, 2019 by

Financing at Mercedes-Benz of Rocklin

Understanding the Difference Between Leases and Loans


Choosing a Mercedes-Benz: Your Financing Options

When you’re thinking about acquiring a Mercedes-Benz, the decision to lease or purchase will almost certainly be the top consideration. While both leases and loans provide advantages, understanding their key differences is vital to making the choice that best fits your preferences.

At Mercedes-Benz of Rocklin, helping you select the right financing is just as important as selecting the right vehicle. Mercedes-Benz Financial Services offers flexible financing packages designed to accommodate your specific needs, and our team of professionals will ensure you receive the highest level of service at every step. Come by, call or email us today to explore the options available.

Leasing: The Basics

A lease essentially allows you to use a vehicle for a set period of time while paying for its depreciation during that time, along with other fees and interest. The depreciation is based on the initial price of the auto at the time of the lease—also known as the capitalized cost—and its residual value, or the expected value of that vehicle at the end of the lease term. Interest and fees can vary, as do actual lease periods: the most common are two and three years. Fees generally include a lease origination fee and registration costs of the vehicle.

Once lease terms are arranged, a certain portion of the entire cost may be due at signing, and the balance is then paid in monthly installments over the remainder of the lease period. At the end of that time, the vehicle is returned to the dealership, which has retained full ownership throughout the lease period.

For example, you lease a Mercedes-Benz C 300 for three years. If its capitalized cost is $50,000 and its residual value after three years is $38,000, you would pay the difference of $12,000—plus interest and fees—over that three-year period. Once the three years are up, you’re free to renew the lease for a new term or look at other vehicles and options, including ownership.

Taking advantage of the Mercedes-Benz Financial Services First Class Lease® program is a great way to drive a new Mercedes-Benz for less: you may have little or no down payment or up-front sales tax, and the program can be tailored to your particular needs. At Mercedes-Benz of Rocklin, you can apply for financing online and our experts are happy to discuss available finance options with you anytime.

Purchasing With a Loan

Besides the variance in costs, the primary difference between leasing and purchasing a Mercedes-Benz is the end result—which is why determining your preferred outcome upfront is key. If you enjoy consistently driving a new model while also keeping your payments low, leasing could be the right option for you.

On the other hand, if you prefer to keep your Mercedes-Benz long-term, you may want to consider an auto loan. While terms, fees, and interest vary with loans as well, you’re basically purchasing a vehicle with a set amount of money borrowed from a lender for a specific period of time. Your monthly payments are determined by the initial cost of the vehicle, the current interest rate, the number of months/years included in the loan and any other associated fees at the time of purchase. And as soon as the total amount is paid, the vehicle is yours.

Like our lease program, Mercedes-Benz First Class Financing® offers flexible terms to accommodate all your needs. Discover the advantages of both leases and loans here, and contact Mercedes-Benz of Rocklin today to find the plan you need.


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