Are you a victim of leasing vs. buying a car phenomenon?
People of America are in the mood to spend, and they are leasing and buying new cars at an increasing rate. According to a study by an auto industry research company, the vehicles rolling on the U.S. highways, from cars, SUVs to trucks, have gone to a record of 11.4 years of an average age. This, more than anything else, has been a driving force for people to get themselves into a new vehicle. They are increasingly choosing auto leasing companies than the new wheels dealerships. In fact, leasing of vehicles now is accounting for over 25 percent of the total new vehicles purchases.
Leasing a car is appealing, it has many benefits and it is a more financially sound option for many of us. However, leasing is basically a rental contract and it might not be the right way for everyone. So, before you sign the contract for the new car you just fell in love with; make sure you understand what would be the possible pros and cons of leasing your new car.
Pro: Lease payments are cheaper than loan payments:
Take a min and compare the monthly payments you will have to pay with a typical lease and a typical loan. Anyone with basic money sense will see that they can get their choice of car for less money when leasing because usually, loan payments are more than the lease payments.
Moreover, if you have decided on a specific amount of money as your monthly budget for the car payment, you could actually drive a nicer and more expensive car when going for leasing option instead of financing the purchase with a car loan.
Pro: Drive a new car after every few years:
A typical leasing contact would be for 3 years. This means that you can drive a new set of wheels every 36 months that is well equipped with updated safety technology, comes with a warranty and may even get you some free scheduled maintenance.
You shouldn’t have to make any additions expenses, other than tire rotations, regular oil changes and the monthly payments. In addition, if you did lease a car that you don’t like very much, you can easily get rid of it without waiting for the right time and right deal to come along.
Pro: A Hassle-free end of the lease:
You walk into your auto leasing company and return the car as your lease ends. If you are meeting all the requirements and conditions in your contract, you simply walk away after handing over the keys. Which means that no hassle, negotiation and going back and forth trying to trade in a car or sell a car.
Pro: Additional financial incentives:
Another major advantage of leasing a car is that you are often not required to make any down payment or pay a very small amount. This allows you to take home a new car very easily and without getting too deep into your savings.
In addition to this, in most states, you only pay sales tax on your monthly payments instead of paying the tax on the entire purchase price. Moreover, if you are leasing the car for the basic purpose of conducting business, you can even claim a tax deduction over it.
Con: There is no ownership:
Leasing a car is similar to renting the car for the time of your contract. You don’t really own the car, which means you can’t make the modification or personalize the vehicle in a permanent way. When leasing a car, you must also maintain the condition of your vehicle.
Con: Penalties for wear and tear:
When leasing a car, you are given a brand-new vehicle to facilitate you and give you a quality experience. However, when you bring it back to your car lease broker, you should be mindful of financial penalties with may be associated with the poor condition and excess mileage.
Should you be leasing or buying?
Deciding between leasing a car and buying it largely depends on who you are, how you would treat the vehicle and what you value in the process. In many aspects leasing a car is appealing if you are looking for better service, experience, to pay slowly rather than at once, without any fuss.