Pay for What You Use
A lease is simply paying for the use of a car for a set period of time and a set number of miles. Think of it as a long term rental. Leases usually start at 24 months and increase from there. They’ll also include a bucket of miles that you can drive, though some leases do have unlimited mileage. Of course, these are terms that can be negotiated during lease signing.
Car loans are different, you are paying for the vehicle and not your usage of the vehicle. Your payment for usage of the vehicle is the sum of your payments minus the selling price of the vehicle. Other words, you can’t realize any financial benefits from owning the car until you sell it and even then, any real financial benefits could have been eroded away.
Leases are structured from the get go to save money. They are simple to understand. The cost of the lease is the difference between the new cost of the vehicle and its residual value. Residual value is just the expected value of the vehicle when the lease term expires. The difference is also depreciation and that is what you are essentially paying for. Since you are financing the lease cost, there will be an interest rate charged, depending on your credit tier.
Sometimes car manufacturers need to move more of a certain model for inventory reduction or compliance reasons so they’ll offer lease cash offers to reduce the cost of the lease. They might also increase the book residual value which also reduces the cost of the lease. These offers can make it very financially beneficial to lease your next vehicle.
Always Drive a Newer Car
When you buy a car, you are locked into a contract for 48 to 84 months. You can certainly sell the car before that time is up, but you’ll probably owe more for the car than what it’s worth. You’ll either have to satisfy that negative equity at the time of sale or you’ll need to carry it forward into a new loan. If you want to drive a new car then you are going to pay for it.
If you go with a lease, you can drive a new car every 2 to 3 years. When your lease term is up, you drive to the dealer, sign a few forms, and you are free to look for another vehicle. It’s really that easy.
Better Business Tax Advantages
If your business is leasing the car then the advantages can be tremendous. When traditionally buying a car, businesses are only able to deduct the depreciation of the car along with mileage expenses. When leasing a vehicle, a business can deduct the entire lease payment as a business expense in addition to all of the other vehicle deductions. No matter what kind of business structure you use, your business can find a way to financially benefit from the tax deductions afforded by leasing a vehicle.
You can lease your new vehicle with maintenance service included in the lease. This makes for a very hassle free driving experience. You don’t need to worry about paying for maintenance and since the car is still under warranty, you don’t need to worry about expensive car repairs. Your out of pocket car expenses on a lease might just be gas and car washes. With fewer hassles, you can focus on the parts of your life that are more meaningful and important.
Some people say that car ownership is more flexible than leasing and that may be true for some people. For example, you don’t have to worry about the number of miles that you’re driving. Nevertheless, leasing can be even more flexible than ownership. It’s easy to end your lease on your car and walk away from it, but you can also choose to buy out your vehicle at the end of the lease and keep it. If you want out of your lease early, you can find someone to assume your lease for you. It’s often much easier than finding someone to buy your car for what you still owe on it.
There you have it, 6 great reasons why leasing your next vehicle is a smart move. You now know the advantages of leasing vs. buying. Car leasing can save your money, offer tax benefits, give you more flexibility with fewer hassles, and help you always drive a new car.