In the automobile market, the purchase of new vehicles has been pegged on taking car loans and cash payments. There is, however, an alternative that is gaining popularity with time. That alternative is car leasing!
Car leasing has been long perceived to be a preserve for the wealthy people. This has now changed, with all walks of people getting new cars on lease. Families can acquire cars on lease, students, business entrepreneurs and any other individual out there. The bone of contention between car leasing and car buying then crops up. Many will say it is a decision that lies with the buyer depending on their preference. Most people take loans to buy new vehicles; it is equally possible to use leasing as a way of acquiring a ride for use. [https://cars.usnews.com/cars-trucks/buying-vs-leasing]
What is Car leasing?
Car leasing involves taking a vehicle from a seller for a specific duration based on stipulated hire terms. The car is then reclaimed by the owner at the expiry of the leasing period. You may take a new or used vehicle under the leasing agreement. With a leased car, you start using it once you pay the required fees. You only fund the depreciation that occurs on the car during the lease period (commonly up to three years).
Car leasing vs. car buying
Buying a car using a loan implies that you are taking a loan based on the entire cost of the car. The deductions from the car value include the down payment and trade-in value. With a leased car, you are going to incur monthly charges for the period the car is under a lease. The amount you are paying will be the difference between the vehicle’s price and its worth at the end of the lease period.
The major difference to note between the purchase of a car and having a car on lease include a high up-front payment on purchased vehicles as opposed to leased ones. Car monthly payments for vehicles on lease last as long as the lease period is on. With the full purchase of a vehicle, you can repay the auto loan and subsequently, enjoy zero monthly charges. One is also at will to sell or drive his purchased car. On the other hand, you will be required to upgrade to the newest model after the lease period.
Benefits of leasing a vehicle
Leasing a vehicle costs less on up-front charges. Cars on lease cost from zero to seven thousand dollars, a price most people can afford to start with. This gives buyers the opportunity to drive any car that they may not afford to purchase. Any model available for leasing can be dispensed to a customer who presents enough documents to guarantee him a leased car. Buying of cars, on the other hand, attracts high up-front costs that include a down payment, registration fees amongst other hidden charges.
Monthly payments for leased vehicles prove to be lower as compared to loan repayments used in buying vehicles. Payments made for lease charges are only tied to a vehicle’s depreciation during the lease period. Buying a car may demand more since you have to pay back the whole amount it costs in the market. There are other fees like taxes which you must equally settle.
The future value of a leased car does not affect one’s financial status. Once a vehicle has been used after a lease, it is returned to the lessor who owns all financial obligations that come with it. When a car depreciates, it does not affect the person who leased it. When you buy a car, you fully own it, and the future value is going to affect one’s financial status. [http://www.consumerreports.org/cro/2012/12/buying-vs-leasing-basics/index.htm]
Use of newest and technologically advanced safety features in cars. Car leasing provides the opportunity for consumers to enjoy modern safety measures installed in cars. The three-year period within which a car is on lease gives room for other technological advancements that can be enjoyed by those leasing vehicles. Buying cars in a high frequency is a tall order for a normal citizen. Trends and security features will, therefore, be enjoyed by average citizens leasing cars.
Easy to return vehicles. Owning a car can prove to be a difficult venture. Under the car lease option, you can easily get off the burden by returning it to its owners at lease-end. When a car is yours, and you need to get rid of it, several legal and financial complications arise forcing you to commit much time and resources towards the course.
A short term period of a lease offers the cheapest option of acquiring a car for use. If you use a leased car to conduct business, you could even qualify for deductions that will help to boost your firm’s financial health.