Last Updated 2 years ago
Are you considering getting a new car? If you answer yes, then you should read this before rushing to buy one.
Many people prefer to buy because it is more popular among American drivers, but not everyone has the same needs or budget. Instead, have you ever thought about leasing?
Leasing a car comes with a set of advantages that can make this option perfect for your next vehicle.
Credit: Trace Constant
In this article, we will explore five compelling reasons why leasing a car can be a great option for you, which might not be as obvious as you might think.
So, buckle up, and let’s dive right in!
Leasing Get You Smaller Monthly Payments
When you buy a car, you are paying either in cash or with a loan the total cost of the car. You pay it and then is yours, easy peasy.
On the other hand, when you lease a car, you are paying the difference between the price of the vehicle in today’s market minus its expected value at the end of the contract. In other words, when leasing a car you are only paying for the expected depreciation during the leasing period.
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That being said, the comparison in monthly payments between leasing and buying is evident. When buying a car, your monthly payments are calculated as the total cost of the vehicle divided by the number of months on your loan. Conversely, leasing only takes into account the depreciation divided by the months of the contract term which typically are 24 or 36 months.
Of course, this is a very simplistic way to look at this. Other costs are involved in how small the monthly payments will be such as how much you put on the down payment, interest rates, fees, taxes, etc. but since these costs apply to both options (i.e. leasing or buying), we can disregard those details in this comparison.
Forget about Maintenance And Repairs
When you buy a car, you can decide when to take your vehicle to the shop to get the maintenance done. But if you are leasing a car, you must make sure you are performing the scheduled maintenance routines and repairs as per the owner’s manual.
Credit: Malte Luk
However, most of the leasing options in the market include warranties that cover this type of service so that you don’t have to worry about it. Isn’t this a reason enough to lease a car?
Drive The Latest Models Every Few Years
Who doesn’t like the smell of a new car?
Leasing contracts are typically only 2 or 3 years long. At the end of the contract, you return the old car to the dealership and after signing another contract you can leave with a newer model.
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Sit back and enjoy the reliability of a new car with less mileage. Plus, another benefit is that the new vehicle will come with the latest technology features. From the most recent info system technology that allows you to better interact with your car using your smartphone, to the latest advancements in safety,
Ideal For Those Staying A Short Time In One City
Moving to a new city for work or school? In this case, leasing can be the perfect solution for you helping to eliminate the burden of thinking about what to do with the car when you need to move back to another city.
At the end of the leasing contract, you return the car to the dealership and continue with your life.
Credit: Pavel Danilyuk
Let’s think about the other option. If you own a car, and get rid of it you have to sell it privately to get the best value. However, selling a car privately is hard for many reasons. You need to list your car on different sites like Facebook Marketplace or Craiglist to have your car visible in your local market.
Then finally, when you find a potential buyer, she might need to get approval for a loan first or sell another car before buying yours. Ugh.
Find Better Deals In Monthly Payments
As explained before, when you lease a car you are not paying for the total value of the car but for the depreciation during the time of the leasing.
Although monthly payments are dependent upon the initial amount you pay before taking the car out of the dealership, interest rates, and fees; the general rule is if a certain model tends to maintain its value, then the difference in how much the car costs today compared to how much it will cost at the end of the contract will be smaller than other models. In plain English, the lower the depreciation the lower the monthly payments.
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Therefore, looking for cars that historically tend to maintain their value will be your best decision. The Kelley Blue Book released a list of the cars that maintain a great percentage of their MSRP (manufacturer’s suggested retail price) after 5 years. The list includes models from Toyota, Subaru, Honda and Ford.
Those models, besides their quality and proven reliability throughout the years, will help to minimize your car payments every month.
Tax Write-Offs Of Your Car Lease Payments
Here is a bonus, if you are a business owner, you can save even more money.
As stated by the IRS, only you can deduct your car lease payment if this was used for business purposes. Otherwise, only the portion of the lease business-related can be can be claimed as a deductible.
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When you buy a car, you can only deduct the portion that corresponds to the depreciation of the asset, not the entire monthly payment. So, this is another great reason why leasing a car can be a great option to save some bucks.
Always reach out to a tax professional who can advise you on what would be the best option for you depending on your particular situation.
In summary, the are amazing benefits of leasing a car that are not very well known:
- Leasing a car most of the time will get you lower monthly payments than buying it.
- Many leasing contracts include warranties that cover maintenance and repairs.
- Leasing allows you to drive a newer model every 2 or 3 years.
- If you are planning to live in a city for only a few years, leasing avoids the hurdle of selling the vehicle.
- Look for cars that maintain most of their value after some years, these models can get you smaller monthly payments.
- If you are a business owner, the leasing payments could be deducted from your taxes.
In the end, the answer to whether to buy or lease a car will heavily depend on your financial situation, your plans, and your preferences. And these impressive benefits can help you make a better decision for your pocket.