How a lease works
A lease gives you the option to use and pay for a vehicle for a set time period, typically anywhere from 24 to 48 months. At the end of this time, you can either pay off the loan or return the vehicle. You are given a certain number of miles you’re allowed to drive per year to ensure the vehicle keeps its value. Leases are more attractive for individuals concerned with the short-term and living life in the moment.
Low or no down payment
Buying a car requires a significant down payment that you might not be able to come up with as quickly as you need a new car. Leasing gives you the opportunity to get in a new car without putting a large sum of money down. You’ll still need to pay taxes, title and registration fees, but it will be thousands less than you’d be spending if you were to buy the car instead.
Lower monthly payment
A car lease only requires you to pay for the depreciation on the car instead of its full value. This means your monthly payment will be substantially less than buying. You could see savings as low as 30 percent or as high as 60 percent depending on the terms of your lease. You aren’t paying for equity in the vehicle since it gets returned at the end of the lease.
New and stylish
Trading in your car every few years allows you to change what you drive frequently so you don’t get bored. You can adjust the vehicle for your lifestyle changes, such as switching from a car to an SUV for extra space or getting a truck so you can tow that new RV you bought for summer camping. New cars also have the newest technology and safety features on the market allowing you to stay at the front of the pack.
Low or no maintenance costs
Leases vehicles are covered under a bumper to bumper warranty from the manufacturer the entire time you own it. If anything goes wrong, you’ll be able to take the car to a dealership and have the problem fixed without costing you anything. New cars are less likely to break down than older ones. You’re still responsible for getting regular maintenance performed as outlined in your lease such as getting the oil changed every 3,000 miles or having your tires rotated. Some leases have an all-inclusive plan that covers regular maintenance along with the warranty to make ownership even that more affordable.
Businesses aren’t the only ones who can benefit from the tax advantages of a lease. When you buy a new or used vehicle you have to pay tax on the full price of the car, while a lease only requires you to pay sales tax on the monthly payments. Only a few states, six to be exact, require you to pay sales tax on the full price of the vehicle. This gives you lower overall costs and upfront payments.
Many people have the misconception that you’re subjected to high fees and penalties when you return the vehicle. If you keep it clean and have it detailed before turning it in, you won’t have any issues or fees. Keep an eye on your mileage and don’t take your vehicle on cross-country trips to avoid over-mileage fees, which can range from 15 to 25 cents per mile. It’s possible to negotiate during a transaction to get a higher mileage limit for a slightly higher monthly payment to ensure that you don’t end up accidentally bypassing the limits established in your lease.
Consider how beneficial a lease can be to your lifestyle. Instead of spending money to pay for a car that depreciates faster than you can pay for it, look at the option to lease. You’ll spend less in the long run and know that you’ve always got a safe, well-maintained vehicle to get you from place to place every day.