At one time, leasing a vehicle was an option reserved for corporations and luxury car buyers. Today, leasing a car is an option for any car shopper. In fact, when choosing to lease, car buyers may be able to afford a car that would otherwise be out of their price range. First, you should examine how you will be using the car to determine if leasing is the best option for you.
Most leases have a term of three years/36,000 miles. If you normally drive less than 12,000 miles a year, then leasing is the perfect option for you. You will have the option of either returning the leased car to lease a new vehicle, or you will be able to purchase the car you’ve been leasing at the end of the three year lease period. This way, you will always have the most current safety features and technology, plus you will not be worried about car repairs as your vehicle is new. Even if you experience trouble with your vehicle, because it is under 36,000 (the normal amount of mileage before warranty runs out) any repair bills will be paid by the car manufacturer. In this way, you can save a lot of money. You will also find that normally your lease payment in cheaper than a financed payment.
Your lease payment is based on the basic depreciation value of the car you are considering leasing. The finance company will add some fees in with this number, but even so, a leased payment is usually much cheaper than a regular financed payment. The financed payment will take into consideration the total value of the vehicle, plus taxes and fees, then divide the payment by the number of months financed (sixty or seventy-two months, normally). Unfortunately, unless you have a significant down payment or trade-in, outright buying a vehicle is much more expensive. Even if you have no down payment, you can still drive away in a new lease vehicle. Finally, most leases have the option to purchase at the end of your contract; the price is often nominal compared to buying a similar car from the lot. Another money-saving feature of many leases is included maintenance. Some car manufacturers include at least two years’ worth of oil changes, tire rotations, and other routine maintenance as a part of your lease contract. This makes leasing an even more popular option.
When buying a car, you may be enticed into considering taking a longer loan pay period. As mentioned previously, the life of a traditional car loan was sixty months (five years). Due to the economy and the fact that many people are willing to take longer to pay off a loan in order to have a cheaper monthly payment, car financial companies are now offering seventy-two month loans and eighty-four month loans (seven years and eight years, respectively). This may seem like a great option, but over time, the interest of your loan will compound, leaving you paying more money over the life of the car loan. A lease gives the car shopper more definite information about exactly how much the cost of ownership is. Car buyers could spend significantly more over the life of their loan versus those simply leasing their vehicle.
What’s more, leasees have the option of simply walking away once their lease is up. However, if you decide to lease another vehicle, many car manufacturers have loyalty programs in which they forgo the fees that leasees might be responsible for otherwise. Plus, you will once again be riding in a new vehicle with all the latest safety features and technology.
Leasing is a much better option when it comes to car shopping. You will be in a new vehicle with all the latest technology, few (if any) car repairs, a brand new bumper-to-bumper warranty, and, in many circumstances, free routine maintenance. Don’t forget about the lower monthly payment as well! If you drive less than 12,000 miles a year, leasing is the better option when car shopping.