When it comes to getting a new ride, most people prefer to buy a car. However, this is not the only option available. In the past, leasing was only available to luxury or corporate car customers, but now, anybody with an excellent credit score can lease a vehicle. Due to changing purchasing habits and the rising prices of new cars, an increasing number of people chose to lease over buying. Find out why you should lease your next car.
How Leasing Works
If you decide to buy a vehicle, you have to pay the entire purchase price either with financing or cash. A lease, on the other hand, only requires you to pay the difference in the price you’ve negotiated and the vehicle’s residual value. The residual value is the expected value of the car when the lease ends. In order words, you’ll only be paying for the depreciation that happens over the lease term. At the end of the lease, you can either turn the car in or purchase it.
Leasing Payments
Unless you’re buying a car with a huge down payment or high-value trade-in, you’ll almost always get a lower monthly payment with a lease. This is because you aren’t paying for the full price of the car. If you choose to lease a vehicle, you could upgrade to a costlier model or add more options while staying within your budget.
Leasing a car is also a sensible option if you haven’t saved enough for a down payment or don’t expect to get much for your trade-in. The down payment you need to pay on a lease depends on the type of car you choose. It usually doesn’t exceed a couple thousand dollars. You can even find lease deals that don’t require you to pay anything at all at signing. However, similar to other installment purchases, the bigger your down payment, the lower your monthly payments.
Warranty Coverage Throughout Lease Term
Most leases last for three years, but you can opt for a shorter or longer lease. Since the basic warranty on most vehicles lasts three years or less, you’ll most likely be covered throughout the duration of your lease. Some leases come with complimentary maintenance, which can significantly lower your cost of ownership.
Tax Savings
Leasing a car may also help you save substantially on sales tax. Consult a tax expert to find out how a leased vehicle is taxed in your locality. In some areas, only the down payment and monthly installments are subject to tax. In other places, you need to pay tax on the entire cost of the car.
If you have a good credit history, leasing a car is something worth considering. It is easier on your wallet and gives you an option to purchase the car at the end of the lease. With leasing, you can always be driving a car with the latest technologies without having to buy a new car every few years.
Image via Flickr by RL GNZLZ
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