What Are The Advantages Of Leasing A Car Instead Of Buying One?
What are the advantages of leasing a car? While no single answer is definitive for everyone – each situation is different – there are a handful of objective advantages to eschewing the purchase of a vehicle and signing up for a lease.
We’ll get into the details but the bottom line is that leasing often allows you to get more car for less money. The reality is that some people can’t get by with a high-mileage junker; they need a more upscale car for business or to entertain clients.
Just like a purchase, expenses are tax deductible. Here are a handful of other good reasons to consider leasing.
In most cases, leasing a car results in a smaller monthly payment than if you bought it outright.
The only way this wouldn’t hold true would be if you put down an incredibly large down payment or had a high-value trade-in.
The reason for this is simple.
When you buy a car the monthly payment is calculated on the entire cost of the vehicle. A lease only takes into account the amount of expected depreciation over the length of the contract, which is typically three years.
At the end of the lease you return the car to the dealer and go about your merry way.
Perhaps a simpler way to think about it is that your lease payment is meant to cover the difference in value of the car from the moment you took it until you turned it in.
Industry insiders refer to this as the “residual value.” But the advantages to leasing a car don’t stop there.
More Car, Less Money: Keep Your Cash In Your Pocket!
Earlier, we alluded to the idea that leasing allows you to drive a nicer car with less money outlay. Put another way, you could drive a nicer (and keep it clean- inside and out) car for the same amount of money.
Regardless of how you look at it, you’re getting more bang for your buck. The reasons you might want to upgrade your wheels are probably obvious.
The onrushing pace of technology decrees that each year’s car model is eons ahead of the last when it comes to safety and convenience features.
Whether for your own pleasure or to simply to “keep up with the Joneses,” leasing allows you to take advantage of tech innovations more quickly. As much as we might hate to admit it, appearances do matter.
On the flip side, all that new technology we just talked about can result in horrendously expensive repair bills when things go wrong, and if a major system craps out, you could be looking at thousands of dollars to get it running again.
Next to medical repairs, car repairs might be the biggest budget buster for the average American. Here’s something to ponder.
When you lease a car, you will be covered for damage and repairs under the car’s factory warranty, normally for the length of the lease.
Especially for those of us who are not mechanically inclined, this can create great peace of mind not possible when you buy a car and foot the bill either for expensive additional protection or pay for repairs out of pocket.
No matter how you look at it, leasing a car provides the best opportunity for someone to pay the bill when it breaks down.
Ease of Upgrade
As we mentioned, a typical car lease runs three years. At the end of the lease you can turn the car back into the dealer OR sign another lease on a newer car.
The reality is that most people who buy a car intend to drive it longer than three years.
By that time the vehicle will likely have accumulated a collection of dings, scratches, and (hopefully not) maybe even a dent or two.
But the average Jane or Joe is so happy to have the thing paid off they’ll try to drive it another year or two or ten. By that time the car is almost definitely going to fall into the “clunker” category.
But you, leasing genius that you are, can rotate into a new car every three years (check this too) while making lower monthly payments than the poor schlub who decided to buy.
As long as you have met the rules of the contract in regard to regular maintenance and mileage limitations, an upgrade is as easy as signing your name and switching keys.
Something else to keep in mind is that, with a lease, you can forget about ever having to go through the trade-in value haggling process.
When you buy a car, a trade-in is often involved and dealer and buyer find themselves diametrically opposed as to what the value should be.
For those opposed to confrontation, this can be the Tum’s moment you would prefer to avoid. Lease your car and you can. Trade-ins never come into play in that scenario.
We couldn’t end this discussion without bringing up the sales tax advantage you will enjoy when you lease a car. The reality is that the state always take its pound of flesh on car transactions in the form of sales tax.
The going rate is usually about 5 percent based on purchase price OR the monthly payments when you take out a lease. A decent car could easily run $20,000 to buy, which works out to a sales tax bill of around a $1,000.
The same car leased might add up to around $8,000 in total payments, for a sales tax bill of $400. This is a significant difference and one worth thinking about when pondering your vehicular options.
So what are the advantages of leasing a car? We’ve offered several factors to consider. The bottom line is that you get more car for less money and less responsibility.
That’s enough for some people to say, “Where do I sign?” But don’t ever sign a lease until you read through the entire contract and understand exactly what your rights and responsibilities are.
A hint: there is a mileage limitation that invokes stiff penalties if exceeded. We suggest you make a legitimate assessment of your driving habits and then bump it up to the next level.