In America today, stagnant wages, mixed with the ever increasing prices of new cars, have created a large swathe of the population that struggles to be able to afford reliable transportation. If you’re retired or independently wealthy, having an alternator fail, a tie rod break or a head gasket blow may not be an existential crisis. But if you’re a working-class provider, for yourself or your family, unreliable transportation can quickly translate into a loss of your livelihood. This is especially true today, with public transportation becoming ever more unsafe, spotty and flat-out unavailable to the majority of U.S. citizens.
But many people simply don’t have either the credit history or the cash for the down payment that is so often required to buy even a lower-end model of new car. Many, instead, turn to buying a used car, usually with more than 100,000 miles. Sometimes this can work out. But it’s always a real gamble.
After 100,000 miles, the rate of mechanical issues begins to skyrocket. Many cars, even modern ones, never make it past the 200,000 mile mark. It can seem like buying a used car is saving you a ton of money. But when the head gasket blows out or the transmission sends a gear through the casing, the stark reality that your $5,000 car has just gone to a value of zero is not something you want to be faced with.
Luckily, there’s another solution, a way to get the confidence and reliability of a new car on a used car budget. Leasing can allow people who wouldn’t otherwise have access to the perfect reliability of a brand new car, under manufacturer warranty, to enjoy all of the benefits that driving a new car entails. Let’s look, in a little more detail, at some of the reasons that leasing may be your best choice for acquiring your next car.
The real deal-killer for many Americans, when it comes to buying a new car, is the huge cash outlays that are often required to purchase a new car. Obviously, if you are paying cash, you can expect to need the entire sticker price or more. But purchasing a new car on a bank loan often requires tremendous cash on hand as well.
A typical $35,000 car, bought on a bank loan, can easily require $10,000 or more in down payments, taxes, origination fees and other costs. This is just too much money for most people. Some dealerships may have occasional zero-down teaser deals to get people in the door, but these loans will typically prove even more costly over the term of the loan. Gimmick payment plans, like zero-down and adjustable rate loans, will often sharply increase the risk that the buyer will default on their loan, allowing the bank, or the dealership, if they provide the financing, to repossess the vehicle. This is a serious risk to the buyer, as those who have cars repossessed usually lose all of their equity in the vehicle. In short, buying a car on a bank loan or dealer financing is one big, expensive headache.
Leasing avoids all of these problems. Firstly, there are virtually no up-front costs when leasing a car. Most leases require only prepayment of the first month, as well as a nominal security deposit, which the lessee will get back at the end of the lease term, as long as the car is returned in good order.
Secondly, there is no equity at stake. While it’s never a good idea to stop making payments on a car, should you ever have a leased vehicle repossessed, you haven’t really lost anything because you’ve been paying for your usage as you go along. Get a financed vehicle repossessed halfway through the loan term, and you’ll likely be losing thousands in invested equity, a disastrous outcome.
Even as huge as the savings are on drive-off costs for a lease versus buying, the savings on monthly payments can add up to even more. On the example of the $35,000 car used above, a typical monthly payment for a loan on that vehicle might be $600 to $800 per month, depending on the credit history of the buyer. On a lease, the same car could be acquired for as low as $400 per month. Over the course of a typical 36-month lease, this can add up to thousands and thousands of dollars in savings.
This is yet another reason that leasing can allow those who otherwise couldn’t afford a new car to enjoy all the benefits of driving one.
Some people believe that you should own your car, no matter what. But the benefits of leasing, especially in today’s economy, are quickly outpacing the benefits of ownership, particularly when it comes to the rapidly depreciating automobile.