When you enter into a car lease, you don’t actually own the vehicle. This scares some people off, but believe it or not there are advantages to this. By leaving the vehicle ownership with the lease company, you can drive a vehicle of your choice for a lower payment and upgrade to a newer vehicle more often.
Still not sure about leasing versus auto financing? Once you’re in a car lease, it isn’t the end of the world. When your term is up, you have the option to buy or finance your vehicle for a reduced price. So, if you fall in love with your lease you don’t have to worry about letting the car go. If you’re worried about being stuck in a lease, there are also options to help you get out of a lease and transfer it to a different vehicle.
Lease terms and payments vary from vehicle to vehicle, but some common terms will between 24 and 48 months. We mentioned that leasing a vehicle is cheaper. Did that pique your interest? Consider some of the other differences between financing and leasing:
Financing or Leasing: Which is Right for Me?
1. Leasing has a lower initial cost. Many new lease agreements don’t require a down payment, making them easy to get into. Usually all you will need to provide is one month’s payment and a security deposit.
2. Leasing payments are lower than financing. If you’re looking to stretch your budget, or want a vehicle with more features but can’t account for the additional price in financing, then leasing can be a great option. Lease payments on a vehicle will generally be less than financing on a comparable model, so you can do more with your money.
3. Avoid the Hassle of Trade-Ins. If you get tired of your financed vehicle, you’ll have to either trade it in or arrange a private sale. Both options can have a degree of hassle. When you lease a vehicle, the value is predetermined at the start of the lease. If it’s worth less by the end of your contract, the leasing company assumes full responsibility. Unlike financing, you can never be “upside down” on a lease.
4. Get a new vehicle more often with leasing. With a lease, it’s easier and more convenient to upgrade to a newer model. You also avoid many of the costs of vehicle maintenance, as you can upgrade before most warranties run out.
5. Pay less tax on a lease. When you finance a vehicle, you have to pay tax on the entire value of your purchase. When leasing, you only pay tax on your monthly payment. This can be a great cash saver for small businesses looking to submit vehicle tax deductions.
