There are two ways to go about paying for a car. Most people are familiar with the traditional method of buying a car. Either it is paid for in cash at the time of purchase or a finance officer handles a loan situation for the total purchase of the vehicle. However, some people prefer to lease their cars. There are several benefits to leasing a car over buying one, and there are some things that need to be made clear about why leasing is the best situation available for car payment types.
What is a Car Lease?
Car leases are a method of obtaining a new or used vehicle where the buyer only has to pay for a portion of the car’s actual cost. In essence, when a person takes out a lease on a car, they only pay for what they use the car for time wise. If a person wants a new vehicle every other year, then they can run two-year leases where they change to a new car and a new lease at the end of those two years. In many cases, it is like renting a car for the long term.
How Can a Car be Leased?
There are a few things that are involved in leasing a car. First and foremost, the buyer needs to look at the payments and how they relate to the car’s value. Going for a vehicle with a lower value will often lower those monthly payments. At the same time, a person wanting to lease a car also needs to consider how the car’s residual rate is reflected in the price. This rate reflects the depreciation of the vehicle over time, and going for a higher residual rate will also mean lower monthly payments.
Beware of Set Mileage Limitations
Many leases on cars have limitations on what can and cannot be done to the car. After all, this is a long-term loaner vehicle, not one that is actually being purchased to own. Therefore, since the person with the lease does not legally own the vehicle during the leasing period, they are restricted in some ways. One of the largest restrictions is the number of set miles that can be driven during the course of the lease. If this number is breeched, then a fee must be paid per mile that is over the limitation. Therefore, this fee can become rather costly, so people who lease a car need to make sure they keep tabs on their mileage routinely.
Why is Leasing a Car Better?
When a person goes out to find a new car, or at least a car that is new to them since used vehicles are part of the consideration process, they need to decide between buying and leasing. As stated earlier, when a car is leased it is not technically owned by the person paying on the lease. Hence, limitations can be placed on what can and cannot happen to the vehicle. There are some perks to leasing, though, that make it the more worthwhile option.
Financial Savings with Leasing
One of the most common reasons why people decide to lease their car is the fact that not nearly as much money is needed up front. Most people who buy a car need to have their down payment handy, and sometimes they need to pay for title fees and such on top of that down payment. This situation means a lot of money is needed up front. A lease does not require these costs. In most cases, the only payment needed is the first month’s payment and a security deposit. People have the option of making a down payment to make their monthly payments lower, but doing such a thing is not necessary.
Selling the Car is Easier
What most people fail to realize is that selling a car is a real hassle. People who buy a car eventually have to sell it or trade it in, which can be a hassle. Prospective car buyers and dealerships accepting trade-ins want to pay as little as possible for a vehicle, which is a factor that makes selling a car the most hassle. In most cases, people take a loss on selling or trading in a car. This situation does not happen as a car lease just runs out and it goes back to the dealer. An offer will be made to purchase the car outright, but the car leaser does not have to do such a thing. They can go right to leasing a different car instead.
There are many reasons why leasing a car is so much better than buying one. The ultimate benefit is being able to drive around in a new or used dream car for a certain amount of time without having to worry about long-term maintenance concerns.