Although not for every prospective buyer, vehicle leasing can offer certain advantages and be a very attractive alternative to a traditional purchase. You must consider a few important factors and make sure a lease would be beneficial to you.
What are the advantages?
Lower Monthly Payments
Because you only pay for the portion of the car or truck that you actually use, (the “depreciation”), your monthly payments are 30%-60% lower than for a purchase loan for the same car and same term.
More Car, More Often
Since your monthly payments are lower, you can obtain more car for the same money and drive a new vehicle every two to four years, depending on the term length you choose.
Less Maintenance Hassles
Most people like to lease for a term that coincides with the length of the manufacturer’s warranty coverage so that if something goes wrong with the car, the repairs are always automatically covered. You may also be able to purchase prepaid maintenance plans at a significant savings which cover all planned maintenance such as oil changes, etc.
Lower Upfront Cash Outlay
Leases generally require little to no down payment, which can make buying a new vehicle more affordable and free up your available cash for more savings and investing. However, you can choose to make a down payment, or trade in your old vehicle, to lower your monthly payment amount even further.
Lower Tax Obligations
In most states of the U.S. and in Canada, you don’t pay sales tax on the entire value of a leased vehicle as you would if you purchased. You’re only taxed on the portion of the value that you use, (that “depreciation” again). The small portion of tax you do pay is spread out and paid along with your monthly lease payment instead of being paid all at once.
No Used-Car Hassles
With leasing, the headaches of selling a used car are eliminated. When your lease ends, you simply turn it back to the leasing company and walk away, unless you decide to buy it or trade it.
Gap Coverage Included
Most leases automatically include free “gap” protection in case your vehicle is totaled in an accident or stolen, and you still owe more than the vehicle is worth. Loans do not generally come with gap protection.
Even with all of the above benefits, vehicle leasing is not the right choice in every situation. Therefore, you’ll want to examine your requirements to determine if you are a good leasing candidate.
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