Why Should You Consider Leasing?
By leasing a new vehicle you get more car for less money. The car’s monthly payments are typically lower because you’re only paying for the future depreciation of that vehicle, and not the actual sales price. For example, on a $30,000 car, you’d finance the entire $30,000 purchase price with a car loan. With a car lease, you only pay a percentage of that. The car’s predicted future value is what it is expected to be worth at the end of the lease, which is its residual value. The residual value is subtracted from the purchase price and what’s left over is what you make payments on. So if the car’s residual value is 55 percent after three years, for example, that means the $30,000 car would be worth $16,500 at the end of the lease. You’d make lease payments on the remaining $13,500 and not the full $30,000, plus interest, taxes and fees. If you only have a small down payment saved up, leasing may also be better for you. Many car leases require anywhere from $0 to several thousand dollars up front, though the down payment is negotiable. Many advertised lease offers will promote low payments, but require a sizable down payment. If you want to put as little down as possible, remember that your monthly lease payments will be higher.
Many leases last about three years, which is typically the length of many new-car bumper-to-bumper warranties. As a result, the car is usually covered under warranty for repairs for the duration of the lease. You still need to maintain the car, though, which includes oil changes, tire rotations and recommended maintenance from the manufacturer. Failure to properly maintain the car during the lease can result in fees when you turn the car in at the end of the lease.
If you enjoy having the newest high-tech features, leasing could be better for you. Since you’d be leasing every few years, each new car you lease will have the latest and greatest technology and safety features. If you’ve fallen in love with your leased car and want to keep it, you can generally buy it at the end of the lease by paying cash or by taking out a car loan to finance the balance.
Should you have an accident in your leased vehicle, you will not take the depreciation that goes along with a bad Car-fax report. Which normally can affect the value of your car from $2,000-5,000. As long as the leased vehicle is fixed correctly through a reputable company, there is no penalty at the end of your lease. Simply turn the car in.