Deciding to acquire a new car is an exciting venture. It means a chance to test drive vehicles and really define and fine-tune decisions to find the right vehicle. However, the right vehicle also has to come with the right repayment plan. Some people prefer to pay for their vehicle with cash or to take out an automobile loan. Purchasing the car in this way has its perks, but there are many downsides to this business transaction, too. Leasing a car is the other option, and here is why you should lease a car instead of purchasing one outright or with a loan.

How a Lease Works

A lease is not like going out and purchasing a car. You do not, at any point, outright have ownership over the car. The dealership or leasing agency is the ones who have ownership during the time of the least. However, ownership can be gained from a car lease by picking up the tab at the end of the lease and purchasing the car instead of leasing it. Alternatively, the car can be leased for a second time, or another vehicle can be leased in its place. This situation is great for people who want to go about driving a new or gently used car every few years.

For a set time frame, usually two or three years, you can lease a car from a dealership or agency for a set, monthly premium. This monthly cost is paid similarly to how a loan payment would be made on a car, but this monthly cost does and does not cover a few things.

What is Included in a Car Lease

There are several perks to having a car lease over having a car that is being purchased with a loan. One of the most popular perks is that services performed to the car will be taken care of by the dealership. This cost might not be free, but it is at a substantially lower cost. For example, routine maintenance tasks like oil changes might be done at a fraction of the cost. At the same time, some leasing situations might require that this work is only done by the dealership leasing out the vehicle. The same can be said of any other repairs that have to be done to the vehicle.

A car lease does have some restrictions, though. One of the largest restrictions is the fact that set miles are placed on the lease. These set miles are limitations on the number of miles that a car can be driven during a given time frame while the lease is active. To go over this set mileage limitations means having to pay a great deal of extra money once the lease is over. There is a fee charged per mile that has been driven over the stipulated limitation in the lease.

Saving Money by Leasing

One of the greatest benefits to leasing a car over purchasing one is, as mentioned previously, the fact that services and maintenance tasks are performed on the manufacturer’s warranty. This case exists mostly because you will not have the car long enough for most wear and tear situations to take their toll on the car. Therefore, this situation ends up saving you money. However, if you decide to purchase the car at the end of the lease, the manufacturer’s warranty might run out, so services will not always be covered at little to now cost.

Leasing a car also saves money right up front of the contract being signed. There is no need to perform a down payment, which is another way to save money. However, any money that is placed down on the car up front is optional as a way for you to be able to lessen your monthly lease payment. This monthly fee is calculated using a few numbers.

The first number to think about is the payment’s relation to the car’s value over time. This ratio links how much the car goes for retail against what the monthly payments. For people who are looking to save some money, the ideal situation would be to look at cars that have a lower retail value. These cars, naturally, are going to have lower monthly lease payments.

Another thing to look at is the residual percentage in relation to how it reflects on the monthly payment. The residual percentage refers to the vehicle’s depreciated value over the course of the lease. If you are looking to lower your monthly lease payment, then it would be idea to look for a vehicle that has a higher residual percentage. However, this situation also means that a vehicle’s value will depreciate faster over the course of the leasing period.


There are so many reasons why you should consider going with a lease instead of a loan with a car. This situation means that you will be able to save a lot of money in the long run, so there is not any reason why you should not go with a lease.

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