Why Leasing a Car is Smart

With the prices of new cars skyrocketing, leasing a car might be the best option right now to get you into a better, more upscale vehicle than you thought you could afford.
Benefits of Leasing
The world of car buying has changed a lot in the last few years. A lack of new and used cars on car lots has breathed new life into the option of leasing a car. With new vehicle prices soaring, a car lease might be the most affordable option. Some people say, "Why lease when you can own and get money back when you sell the car?" While that is certainly true, there are a lot of benefits to leasing and we're here to show you the many ways that leasing a car is a smart option.
Buying a car is a major commitment. The down payment alone could be up to 20 percent of the vehicle's price. The monthly payments are higher than lease car payments and your loan payments could run for 60 or even 84 months! Then there's the depreciation of a new car to consider. A new vehicle loses most of its value in the first three years. We're talking 58 percent of the initial value.
You may have heard the analogy that leasing rather than buying a car is like renting an apartment rather than buying a house. When you lease a car, you pay a monthly payment for the use of the vehicle, but you never actually own it. In fact, you return the car at the end of the lease. What are the advantages of leasing a car? Let's take a look.
One fifth of all new vehicles were leased last year and there are lots of reasons why. First, compared to buying a car, when you lease you can put little or no money down and you can select a much short term for your lease contract when compared to a car loan.
Less Cash Required
Coming up with the 20 percent down payment to buy a new car can be a big hassle. The size of that payment depends on the value of the vehicle as well as such factors as how good your credit score is. When considering leasing a car, the down payment is a lot lower. The "drive off" amount includes the first month's lease payment as well as fees for the title and registration, an acquisition fee, a security deposit and taxes. To drive your new lease car off the lot, you'll generally be out of pocket less than $3,000.
Lower Monthly Payments
The average monthly car payment last year for the purchase of a new car in America was $700 a month. The monthly payments for leasing a vehicle are a lot less. The average monthly lease payment is $567. That's because when you finance the purchase of a car, you're paying for the entire purchase price of the vehicle plus interest and taxes. When you lease, you're only paying for the depreciation of the car while you're using it.
Because lease payments are a lot less than car loan payments, many people use the difference to drive a more upscale luxury model that they might not be able to afford to purchase.
Lower Costs for Repairs
The term of your lease will likely be three years. New cars are covered under the manufacturer's comprehensive bumper-to-bumper warranty that is good for three years or 36,000 miles. That means you generally won't pay for repairs to your lease vehicle. There's also the automaker's engine warranty that handles any defects to the vehicle's powertrain, and some car brands come with a maintenance plan as well.
When looking over your lease contract, make sure to review the warranty and maintenance agreements to make sure you understand what is covered, and more importantly, what is not covered for vehicle maintenance to your lease car.
Fewer Headaches
At the end of your lease, you simply return the car and walk away. There's no worry or hassle over reselling it. The value of the car you return to the lease company is not your concern. It's a lot like a rental car. Just keep in mind that lease cars are subject to contract rules that limit the number of miles you can travel per year, and you can also be charged for excessive wear and tear to the vehicle.
Drive the Latest Models
Another plus when it comes to leasing is that you can get a brand-new car every three years. That's great for people who like the idea of driving the latest technology offering great performance and all the bells and whistles. New cars have the very latest safety and driver assist features too.
Option to Buy
Auto lease contracts often include a clause that allows you to buy the car at the end of the lease term at a predetermined price. That can be an advantage if the price of cars continues to rise. For instance, people who leased a car three years ago are discovering that their vehicle is worth more now than the residual value of the car as cited in their contract. In other words, the value of cars rose significantly over the three-year lease term and now the car is actually worth more. That means they can buy their lease car and turn around and sell it for quite a bit more than they paid for it.
The Bottom Line
Leasing a car isn't right for everyone but it offers a shorter commitment and lower monthly payments than buying a new car. You can even get a flexible lease that allows for the contract to be transferred to another person. You can get into a lease for little or no money down and if you have excellent credit, your interest rate could be as low as 5 percent.
Remember that leasing companies can apply automaker incentives to your lease deal to make it more affordable. They can also adjust the monthly payment, length of the lease, number of miles you are allowed to drive each year, and the amount due at signing to help you get into the car of your dreams. Every part of your lease deal is negotiable.