In this day of tight budgets and uncertainty over jobs and the future, many people are hesitant to either buy or finance a new car. However, as their older car ages, it becomes less reliable and more expensive to maintain. There is one way that you can drive a new car, upgrade that car every few years, and save money in the process. Instead of buying a new car, consider leasing a car instead.
When you buy a car, you can pay the entire amount upfront or finance the car. Once you have paid off the loan the car belongs to you. When you lease a car, it is similar to taking out a loan for the depreciation on the car while you have it. Your monthly payments are based on the value of the car less what the value of the car will be when the lease expires. When the lease term is up, you return the car to the dealer.
There are many advantages to leasing a car instead of buying a new car. Following are some of the biggest advantages.
Lower Upfront Costs
Buying a car requires either a trade-in of your old car, paying the entire amount upfront, or making a large deposit and making payments. To lease a car you do not need to trade in a car. This is great news for families that need a second car. In addition, to get into a lease generally the only upfront costs are a security deposit and the first month’s lease payment. Some leases may even allow you to forego the deposit, especially if it’s a lease with a dealership you have done business with before.
Save Money on Taxes
Buying a new car requires that you pay sales tax on the purchase price of the car. Many people forget to figure that expense into the cost of a new car. When you lease a car you do not have to pay sales tax because you are not purchasing the car. In addition, businesses that lease cars can deduct the lease payment as an expense which lowers the income that they must pay tax on.
Save Money on Monthly Payments
Financing a car will generally result in larger monthly payments than a leasing the same car. This is because the payment is based on the entire value of the car (finance) instead of just the depreciation while you have possession of the car (lease).
Save Money on Maintenance
When you choose to keep your aging car, maintenance costs can add up as the car starts to wear out. Many older cars reach a point where the monthly maintenance costs can be as much or more than a lease payment would be for a new car. When you lease a new car any repairs will be covered under the manufacturer’s warranty. The only costs you will be responsible for will be regular oil changes and tire rotation. These are regular maintenance costs that any car requires. There are some lease agreements that include the oil changes and tire rotation. You can check with your dealer to see if that is an option you are interested in.
Save Money on Gas
New cars get better gas mileage than older cars. When you drive your aging car you are going to be paying more in gas and getting worse mileage than you would if you were driving a new car. New cars can get up to 40-50 miles per gallon, which will add up to a large monthly savings.
You Don’t Have To Sell Your Car
When you own your car you have to sell it or trade it in when you are ready to upgrade to a newer car. When you lease a car you just return it to the dealer at the end of the lease. You do not have to try to sell the car or negotiate a trade-in value.
Upgrade To a New Car Every Few Years
When you lease a car you return it at the end of the lease term. At this point you have the option to buy the car for the resale value or you can enter into a new lease agreement for another new car. This allows you the option to upgrade to a new car every few years.
Leasing a car vs buying a car outright is a choice that each person needs to make after they compare the advantages and disadvantages to each option. Leasing a car gives you the opportunity to drive a new car with a smaller investment of cash upfront. In addition, you can save money in the short-term. For many people, leasing is the best option.