Not so long ago, car leasing a preserve of corporate clients and luxury car buyers. Today, it is increasingly becoming popular and available in almost every segment of the vehicle industry. With car costs hitting unprecedented highs, a majority of people are embracing car leasing as an alternative to owning a new car for lesser amounts of money. Leasing offers a buyer the chance of obtaining a more expensive car than they could otherwise afford had they considered buying. Instead of relying on expensive loans to acquire cars, it is very advisable to consider leasing.
When it comes to car leasing or buying, there is no one-size-fits-all answer. It is therefore wise to carefully weigh the benefits as well as drawbacks and determine that which best fits your situation. Before you make that leap, look at your budget and your mileage needs, lifestyle, and your credit history. As a prospective car owner, you are always after the best car deal you can land, be it through leasing or buying. Below are some of the giving a second glance at car leasing.
1. Though there are some fundamental differences, leasing a car is akin to buying one in many ways. For instance, when you are buying a car, the car cost is central to determining the loan, besides your trade-in value and the security deposit. In leasing, however, the only cost you foot is the depreciation incurred in the course of the lease term (in most cases is three years plus a little fee). At the end of the lease term, you return the car. With a car lease, the only cost you cater for is the difference between the actual car’s price and the residual value (the expected value of the car at the end of the lease). In most cases, the monthly payment for a leased car is usually less than a monthly loan repayment.
2. Leasing comes in handy when, as a buyer, you only have only a small deposit saved up. Car leases ask for a few to several thousand dollars for upfront payments. Though some advertised lease offers demand huge down payments, many of the best new car deals are those that promise small monthly instalments. Just as it is in car purchasing, the more money you pay, the lower the monthly instalments.
3. With leasing, it is possible to predict the future value of the car up front. For a purchased car, especially a car purchased through a loan and is worth less than the loan balance, has negative equity. In this case, the lessee is required to top up the difference between the cost of the car and the outstanding loan balance. For a leased car, if it is worth less than that amount at the end of the lease, it becomes the least of your worries as the car does not belong to you.
4. Leases are a perfect way of predicting the total cost of ownership. As aforementioned, leases last about three years, or the duration of a typical new-car bumper-to-bumper warranty. Contractual terms ensure that the car is covered under warranty for any damages or unexpected repairs during the lease. It is important to note that the lessee is responsible for the maintenance of a leased car (which includes tire rotation, oil changes, and maintenance as per the manufacturers’ recommendation). Failure to properly maintain and document service for the car during the lease can lead to charges at the termination of the contract.
5. For those who fancy the newest high-tech and safety features, leasing should be the go-to option. Leasing offers car enthusiasts the latitude to get a new car every few years, especially with technology and security features evolving by the day. With car leasing, selling a car or fetching a good price for your trade-in is the least of your concerns. Provided you have adhered to all the rules about mileage and maintenance when the stipulated time of lease is over you just return the car to the dealership and walk away.
Some of the cons of car leasing include not having total ownership of the car, stipulated mileage per year, probably extra costs regarding wear and tear, and, sometimes, problems due to complicated terms of a contract during leasing, among others. However, the advantages of car leasing largely outweigh the disadvantages, and it is a viable option in case you don’t fancy purchasing one for yourself.