Car Buying vs. Car Leasing Can Be Confusing! Figure It Out with These Quick Tips from the Experts
There’s no doubt that buying a car can be an overwhelming challenge–and that you may not feel like you are getting the very best deal for your budget when you’re in a hurry for a new car. That’s were leasing a car can really help you out.
Leases often mean you’ll pay lower payments each month and you can drive a new car without having to pay for most of the repairs. Think of leasing a car like borrowing it from your dealer.
Read on to get our best tips for saving money by leasing a car vs. buying a car:
Pro Tip #1: Write Off a Leased Car on Your Next Tax Return
When you lease a car, you can experience several great tax benefits. First, if you lease the car for business expenses, the IRS allows you to deduct a certain percentage from your income taxes. Secondly, when you lease a car you only pay taxes on the monthly payment as opposed to buying the car. When you buy a car, you have to pay the taxes on the price of the car within a certain time period, usually 30 days.
Pro Tip #2: Pay Less Per Month
Historically, leases cost less over the life of the contract than car payments. You do not make a down payment, for example. Although some dealers try to encourage you to do this for lower payments, don’t do it. If you crash the car after you leave the lot, you won’t get your money back. The insurance company will compensate the dealer, who owns the car, and your down payment won’t transfer to a new lease.
Pro Tip #3: Don’t Pay for Repairs
Typically, drivers who lease cars do not pay for repairs of the car, unlike a car owner. That’s often because lease terms are usually three years or less, and during that time, the car often is covered under warranty.
Now, that being written, one smart thing you should consider is purchasing an extended warranty on the leased car. If the brakes or tires go out, for example, you usually have to pay out of pocket for those items and you don’t want to get hit with a large bill for a car you don’t even own.
Pro Tip #4: Enjoy the Life of Luxury
It may be surprising to learn that about 75 percent of luxury cars are leased. That’s right! When you see that BMW X5 whirling down the road, it’s likely the driver doesn’t even own it. It becomes easier to lease a luxury car because they have higher residual value percents, which is an estimate the dealership gives for the car’s depreciation. Higher residual values equal lower monthly lease payments at the end of the day. What is good about this for the dealership is that they can collect a lower monthly payment from you but then turnaround and sell the car as pre-owned luxury vehicle at the end of your lease terms.
Leasing Your Next Car Has Advantages
Many drivers feel confused and perplexed about car leases, and that’s understandable when you’ve thought car-buying is the only option out there. Leasing a new car has great advantages that you should consider as you move forward in the process. Remember these tips as you talk to your car dealership representative.