Many people are apprehensive about leasing because the benefits over purchasing are unclear. After all, 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 packed with advantages.
From lower monthly payments to even more vehicle options, here’s why leasing a car might be right for you.
What are the benefits of leasing a car?
Leasing is similar in theory to renting an apartment. As the person leasing the car, or 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 terms and conditions you must adhere to and at the end of the agreed-upon term, you return the car to the leasing company. This type of arrangement has several benefits that could 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 obtaining financing to purchase the car.
When you finance a vehicle purchase, you pay the entire purchase price of a vehicle over the life of the financing plus interest. But lease payments are calculated a little differently.
Instead of paying for the entire value of the car, your monthly payments cover the vehicle’s depreciation (plus rent and taxes) over the lease term. Since you’re only financing the depreciation instead of the purchase price, your payment will usually 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
Down payments for a vehicle purchase can run up to 20%, but a lease often requires little to nothing for a down payment. You’ll typically have to pay the first month’s payment, taxes, title and registration fees, and perhaps an acquisition fee or other fees when you sign the lease, but the cost is usually 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 it
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. You can get a 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 vehicles to choose from
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. You may have the option 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.
Should you lease a car?
There’s no definitive right or wrong answer for whether you should lease or buy a car. It depends on your lifestyle, finances, and personal preference.
Leasing may be an excellent option for you, but before you walk into the dealership and sign a contract, you should understand the pros and cons of leasing a car.