Kims Toyota Kim Chrysler Parts Department Loan Vs. When you buy, you pay for the entire car. This is fundamentally why leasing offers significantly lower monthly payments than buying. The principal charge pays off the vehicle's original full purchase price, while the finance charge is interest. The remainder of the principal payment goes toward equity .
Equity is resale value.
It's what remains of your car's original value at the end of the loan after depreciation has taken its toll. It's the part you get back if you sell the vehicle. The longer you own the vehicle, the less equity you have. So, buying a car with a loan is essentially like putting money into a declining-value savings account you never get out as much as you put in. A terrible investment by any measure.