Benefits of Leasing a Car
Many people are hesitant about leasing because the benefits over purchasing are uncertain. A common question is, why lease a car when you can own it and get some money back when you sell it? Depending on your personal preferences, lifestyle, and financial situation, leasing can be filled with benefits.
From lower monthly payments to even more vehicle variety, here’s why leasing a car might be right for you.
What Are the Benefits of Leasing a Car?
Leasing is similar to renting an apartment. As the lessee, you are paying some initial fees along with monthly payments to use the car, but you don’t actually own it. Every lease agreement has its own terms and conditions you must adhere to. At the end of the agreed-upon term, you return the car to the leasing company. This type of arrangement has several advantages that could potentially make leasing a much better deal for you.
1. Lower Monthly Payments
One of the greatest advantages of leasing a car is typically lower monthly payments than if you were financing. When you finance a vehicle purchase, you pay the entire purchase price of a vehicle over the life of the financing plus interest. On the other hand, lease payments are calculated a little differently.
Your monthly payments cover the vehicle’s depreciation (plus rent and taxes) over the lease term, instead of paying for the entire value of the car. Since you’re only financing the depreciation instead of the purchase price, your payment tends to be much lower. These savings can help you either upgrade to a newer, more desirable model for your budget or save money each month on a less expensive car payment.
2. Less Cash Required at Drive Off
While down payments for a vehicle purchase can run up to 20%, leases often require little to nothing for down payments. You’ll most likely have to pay the first month’s payment, taxes, title, registration fees, acquisition fee and other fees when you sign the lease, but the cost usually adds up to less than the cash you’d need to put down on a car purchase financing.
3. Lower Repair Costs
Because lease terms are so short, most repairs will be covered by the manufacturer’s bumper-to-bumper warranty. In some cases, the manufacturer will cover maintenance costs. When reviewing your lease agreement and warranty or maintenance agreements, be sure to understand what repairs and maintenance are covered to avoid unexpected vehicle service bills.
4. You Don’t Have to Worry About Reselling
For closed-end leases, once your lease is over, you just return it and move on to your next car. There’s no hassle trying to resell it, and the value of the car at the end of the lease is the leasing company’s responsibility, not yours. You may still be liable for additional amounts at the end of the lease term, including excess wear and use and excess mileage.
5. New Car Every Few Years Hassle-Free
Car leases usually last between 24 and 48 months. Because lease terms are relatively short, you can drive a new car with the latest technology and safety standards without the commitment or hassle of trying to purchase or sell your current one when it’s time to upgrade.
Once your lease ends, you simply return it to the dealership, choose your next vehicle, and sign a new lease.
6. More Vehicle Variety
Many people have their eye on a dream car but may have a hard time qualifying for financing to purchase.
Leasing a car, however, opens the door to more expensive models and trim packages since it typically comes with a lower monthly payment for the same vehicle. This gives you more flexibility with your vehicle options so you can choose the one that best fits your lifestyle.
7. Potential to Buy the Car at the End of the Lease
Leases often include an option to purchase at a predetermined price. You may choose to execute this option if you love your car or the purchase price is less than its value. On the other hand, you can walk away if the purchase price is more than the vehicle is worth.
While that may leave you regretting not buying it from the beginning, it gives you a chance to “test drive” the vehicle for a few years before committing to it long term.
*This article is for educational purposes only and provides general auto information. The material is not intended to provide legal, tax, or financial advice. Outlooks and past performance are not guarantees of future results. For specific advice about your circumstances, you may wish to consult a qualified professional or contact us below.