As retail prices of cars in the United States continue on a years-long upward swing, car leases have equally risen in popularity. Despite this trend, most vehicle-seeking consumers opt for buying more often than leasing.
Leasing is very similar to renting, with few differences. Lessees basically borrow a dealership’s care for a set time period, usually with various restrictions. Lessees pay monthly installments towards the decrease in value their lease tenure yields, plus interest. For example, Jane signs a 1-year lease agreement on a $12,000 car. At the end of Jane’s lease, the car is expected to be worth $8,000. The $4,000 difference, plus interest, is paid month by month in equal installments.
Jane does not retain ownership of the vehicle and essentially borrows it from the dealer. Jane is also to return the vehicle immediately following lease end and
Car buyers pay the entire purchase price at once. For example, if Jane purchases that $12,000 car for $12,000 cash, ownership is immediately transferred to Jane. Any wear and tear Jane incurs throughout the vehicle’s life is not transferred over to its dealership; depreciation is held by Jane’s vehicle.
Many people are not aware of the extensive benefits car leases offer to lessees, a significant contributor to why leases are not the most popular form of securing transportation. Detailed below are a few substantial benefits vehicular leases bring to drivers’ tables to help readers understand which situations are best suited for leases. Readers will also find themselves better able to determine the value or purchase offers, lease agreements, and compare various extended offers and potential contracts for leases.
Purchase Costs of Leasing are Less Expensive than Buying
Think about monthly lease installments submitted by lessees like this: lessees pay for wear and tear they place on the vehicle, plus interested calculated from an agreed upon rate, and also SALT (State and Local Taxes) plus regulatory fees. Vehicular purchases call for the simple payment price, plus, of course, SALT – no, not table salt; do you think salt would make a vehicle taste good? Question two: doesn’t the price paid for vehicles in outright purchases seem more simple?
The answer is “false,” as the value of leases is based partially off the purchase price of their corresponding vehicles. The price of outright purchases are, obviously, the aforementioned “purchase price.” Both the monthly installments and total value of leases are lower than that of vehicle purchases. Leases essentially only pay for the depreciation tallied into their leased vehicles, explaining why their required payments are lower.
Initial payments submitted upon purchase or lease signing are far more expensive than those associated with the financing of purchases. Financing requires “down payments,” nonrefundable, hefty sums of cash required as a form of collateral. Leases require significantly smaller “security deposits,” refundable balances as long as lease term is completed.
Leases Do Not Require As Many Repairs As Owned Cars
One perceived benefit that accompanies car owners is their vehicles are titled in their, the owners’, names. This equates to having no restrictions related to anything about or including the vehicle, allowing for car owners to modify, add on to, resell, among other things, to that vehicle.
People who lease cars find themselves unable to perform such changes. Many people opt out of leases and instead choose to outright purchase a vehicle because of the its ownership.
However, added responsibilities and duties result in car owners finding themselves needing to fix repairs and any vehicular deficiencies. Lessees, on the other hand, do not have to repair their vehicles or maintenance them and are able to remit them to their lessors to take care of such hassles.
Warranties on leased vehicles subtract from required responsibilities insofar as damages or faults that do not directly result from the lessees’ driving or carelessness.
Lessees Are More Likely to Consistently Drive New Cars Than Car Buyers
Many people, as noted earlier, would rather own a vehicle than “rent” it, like leasing provides. Most everyone who has purchased a car is not able to purchase a newer one in the following year without breaking their banks. Lessees have the unique advantage of driving brand new vehicles annually.