When Does It Make Sense to Lease A Car?
Buying a new car is a big purchase, one you can enjoy for years. But for some, it may make more sense to lease rather than buy.
There are advantages and disadvantages to both decisions. To understand whether leasing is a good fit for you, consider these 5 factors.
5 Factors to Consider for Leasing A Car
Monthly Cash Flow-When you lease a car, you'll often have lower monthly payments as compared to financing a car with the same terms.
Why? With leasing, you're paying for the depreciation during the three-year lease, not the whole cost of the vehicle.
So, if you need to have more monthly cash flow, leasing may be right for you.
Down payment and Initial Fees-Most leasing agreements have low down payments. Sometimes, however, you can get the dealer to wave the down payment.
You'll also pay less sales tax for a leased vehicle because in most states it's calculated based on monthly payments, not the total cost of the car.
Again, this could be a good option if you're trying to lessen the monthly impact on your budget.
Driving-If you drive over 10,000-15,000 miles per year, you'll probably pay extra, depending on your lease agreement.
According to Smart Money, leasing companies often charge somewhere around 15-20 cents per mile for each additional mile beyond the agreed upon mileage terms.
If you buy more miles upfront, you could pay as little as 10 cents per additional mile. Sound a bit daunting? Here's another consideration. If you were to buy a new car and trade-in your old car, you'd be penalized for above average mileage, too.
Leasing for Business-Leasing a car for business is often a good choice because a portion of the vehicle's financing costs and depreciation are tax deductible. If you buy a car for business, you don't have that advantage.
Check out the IRS's guide for calculating tax deductions for leased cars.
Care of the Car-If you're hard on a vehicle, you may want to re-consider leasing because of the wear and tear fees. These fees vary depending on your leasing agreement, but typically are limited to three months' of leasing payments.
Length of Ownership-This is a big consideration. If you plan to keep the car for only a few years, then leasing is a convenient option. But if you want to get out of your lease early, it will cost you as much as six additional leasing payments. Bottom line, make sure you can stick to the lease terms.
Certainly, the biggest distinction with leasing is that you get to have a new car every few years. You also don't have to worry about trying to sell your old car. And you avoid hefty repair bills for an older car. Just turn in your leased vehicle to the dealer and select another new car.
The important consideration is always your lifestyle preferences and your monthly budget. There really isn't a wrong choice here. It simply comes down to what works for you!
Visit Joe Bowman Auto Plaza to see our vast inventory of new and used vehicles!