A car is a necessity for the majority of people. In order to take care of the daily activities of life, you need to be able to get from one place to another in a way that’s affordable to you. In many ways, deciding whether to lease or buy is an issue of household budgeting. Since almost no one can afford to buy a car outright, both leasing and buying will be a matter of financing options. The terms of leasing a car are much lighter on the budget than buying a car. There are many reasons for this fact.
The great big world of leasing
It’s amazing how many people are unfamiliar with what leasing a car entails. This is unfortunate because it keeps people from enjoying the many benefits of leasing. There are dozens of reasons why leasing can outweigh the advantages of buying. Here are just a few of those reasons.
Lower monthly payments
Monthly payments on a lease are determined by a number of different factors. The value of the car is going to figure into it. The money factor, also the same as the APR, will determine the bottom line monthly leasing price. Also factored in is the residual value percentage, which varies by year. It might be 60% one year and 70% the next, so it fluctuates. The residual value is calculated based on the depreciation of the car each year.
Drive a new car often
While ownership is left out of the equation – you will never own a leased car at the end of the lease – you will still be able to drive very nice cars that are new or near new and that give you a great feeling. If you love cars in general and would like to have a different kind to drive every few years, leasing is perfect for you. It enables you to use the car as your own without committing to any one model of car for a long time.
You can get tax breaks from a leased car
Certain things like depreciation value will land you some nifty tax breaks at tax time. Don’t underestimate how much this can make leasing better than buying. You’re going to really appreciate your leased car at tax time.
Save on repairs
When you buy a used car, it’s often too old or has been used too much to be covered by warranty. Not the case with leased cars. You’ll get to take the car into the dealership or leasing agency and have it repaired for free or for a very deep discount. If you’re trying to save money by leasing, this is the perfect reason to do it. There’s no need to panic when the car breaks down because you’re covered by warranty and don’t have to pay out of pocket.
When is buying a car the better option
There are a few cases where people aren’t willing to lease a car. For those people who aren’t on a budget, only ownership will do. If you don’t need a different kind of car to drive every few years, you’ll be happy with the long-term commitment of buying. Not only that, but one of the biggest reasons leasing will be out completely is when a person’s driving situation requires them to drive the car more often.
When you lease a car, you’ll be told how much you can drive it every year of the lease. If you go over that mileage, you’re in trouble, because there’s a fee charged for every mile over. For people who need to drive heavily, whether for work or for their children, leasing isn’t a wise option unless something about the set miles can be negotiated.
Selling a car
Many people insist on owning a car because they want to be able to get some of its value back after they’re done with it. A car that’s paid off can be sold or traded to get a newer car. It’s doubtful that most people can do this every few years, but there’s still some good reasons people want to own their car. At the end they can get some of the investment back by selling it. You can’t do this with a leased car.
While these few situations call for buying a car, leasing is the preferred recommendation for people on a budget who still want to drive a very nice car.