Buying a car, whether it’s secondhand or new, can be stressful. From choosing the right car to price negotiations, the process can be overwhelming and expensive. As a major investment, it generally requires saving and often involves agreements with your bank or credit union regarding payment structures. In many cases, leasing a car is a more cost-effective and accessible means of sourcing a vehicle. It essentially involves renting a car for a specific period, meaning there is no need to spend an excessive amount on upfront costs. Leasing is particularly beneficial for people who don’t drive a lot, as the costs often depend on the number of miles driven per year. While it means you don’t own a vehicle outright, there are several other advantages to consider. Here are six of the best benefits of leasing a car.
1. Lower Regular Payments
It’s important not to underestimate the cost of owning a vehicle. In addition to the initial down payment, you likely have to pay significant monthly costs with interest. When you buy a vehicle, car payments are often significantly higher than lease payments, making leasing more cost-effective for some people. Lease payments are determined by the difference between the original selling price and the residual price. The original selling price is set after negotiating with your dealer. It is the manufacturer’s suggested retail price (MSRP), minus discounts and negotiations. The residual value is for how much the vehicle can be resold when your lease is up. If your annual mileage is relatively low, your regular lease payments are likely to be much lower than if you were to buy a car. This is beneficial for someone looking to decrease their expenses.
2. You Don’t Suffer from Depreciation
One of the most common feelings described after purchasing a vehicle is the freedom experienced when pulling away from the dealership. The unfortunate reality of purchasing a car is that your vehicle’s value drops dramatically as soon as you leave the dealership. The second a new vehicle’s tires meet the road outside the car lot, it can lose somewhere between 9% and 11% of its value due to depreciation. Within one year, a vehicle may lose up to 20% of its value and, within five years, it may lose up to 60%. Although depreciation makes sense, it is a frustrating aspect of owning a car. When you lease a vehicle, you don’t bear the brunt of depreciation in the same way you do as an owner. Instead, you only cover the depreciation experienced throughout the period you lease the vehicle for, leading to cost savings.
3. You Can Drive a Nicer Car
When leasing, you have much more choice in what type of car you can drive. Without paying a large upfront fee, you may be able to afford a range of vehicles that you couldn’t buy. In most cases, new vehicles are more reliable than used ones. They contain new components that have a much longer life expectancy than second-hand ones. This reduces the likelihood of having to pay for costly repairs. Leases typically last between two and three years. This means that you frequently rotate between new vehicles. Modern cars are packed with the latest technologies, allowing lease drivers to enjoy new features.
4. Lower Repair and Maintenance Costs
Most lease contracts include a manufacturer’s warranty that covers car repairs for a certain period. For a lease that lasts 36 months or less, drivers are unlikely to have to pay for repairs. Sometimes, manufacturers and dealers offer free maintenance for a specific length of time. While car maintenance costs can vary significantly, on average, drivers pay around $1,341 per year. Avoiding this cost can lead to significant annual savings. However, this isn’t something that you should take for granted. Lease companies don’t always cover repair and maintenance costs, so make sure you negotiate it as part of your deal. Regardless, it’s always beneficial to invest in a quality car cover to give your vehicle extra protection when it’s not in use and ensure you can return your leased car in pristine condition.
5. Reduced Tax Payments
Depending on what vehicle you drive, tax payments can be extremely high. In most states, tax paid on your leased vehicle is per usage. This means that you only pay vehicle tax for the amount of time you lease the car, contributing to long-term savings. If you own a business, the tax payments are even lower. By registering your car as a commercial vehicle, the tax becomes deductible. In most cases, you can write off all payments as tax deductions. This makes leasing a car a very popular choice among businesses.
6. No Stressful Negotiations for New Or Used Cars
Some people are not natural negotiators and struggle to bargain with salespeople. This can be particularly frustrating when buying expensive assets. To make matters worse, experienced car salespeople are notoriously difficult to deal with. Leasing means you don’t have to waste your energy on stressful negotiations for a new or used car.
Get the Best Possible Value When Leasing
Although there is an element of satisfaction to owning your vehicle, much of it is ego-driven. While it may make sense in some circumstances, not every driver needs to own their car. In many cases, leasing a car affords drivers more freedom than owning one. It alleviates financial strain and ensures that the driver isn’t tied down to long-term contractual agreements. Additionally, they can change things up with a new car every couple of years.