To buy or to leasing a car? Many people have, at one point, asked themselves this question. If your answer is to hire, you need to have your facts right before moving forward. This article gives you a picture of the bad and good side of leasing a car.
It is cheaper compared to buying a car on loan
Typically, monthly payments for a lease tend to be 30to 60 percent lower than the amount you would spend paying off your monthly car loan installments. You can also drive a car that you would not afford if you had financed a loan to buy it. One doesn’t have to be a financial wizard to figure out that they can get the same car for less.
The privilege of driving the latest cars
With a lease, you can change your car every two to three years. This means that you will get to drive the latest car models with up-to-date technology and safety features. If you happen to get a car you are not comfortable with; you won’t have to wait for long to choose another one.
Low maintenance and repair costs
If you lease a car for less than three years, the manufacturer’s warranty will cover you for the entire time. However, you will still have to pay for regular maintenance and minimum auto insurance amount depending on the state you live in. In some cases, manufacturers may offer free maintenance in the first years of the lease.
No used cars
After your lease ends, you return the car to the company. If everything is okay and you have adhered to all the terms and conditions, then that’s it. You won’t have to go through the paperwork and negotiation madness of selling a used car. Some companies may overestimate the leasing value of the vehicle, which is a win for you since you will pay less.
In most states, you are only required to pay sales tax on the car’s monthly payment, rather than its total cost. This saves you more money than buying a car that requires you to pay tax on the full amount. If you intend to use the leased car for business, you can declare the lease payment as a tax deduction.
You don’t require a loan approval
Most people worry about not being approved for a car loan or paying outrageous interests if they have poor credit scores. Leasing companies could always claim back their cars in case you fail to make your payments or violate their lease terms and conditions. Therefore, they are not usually strict when it comes to credit scores.
A great choice if you are prone to accidents
In the event that you buy a car and wreck it, your insurance coverage pays for the damages. The problem comes in when you need to sell the vehicle. You will incur a significant loss because nobody is willing to pay a good price for a car that has been damaged. With leasing, insurance will still pay for the wrecked car, but the problem of diminished value will remain in the leasing company’s hands.
Residual value is locked at the beginning of the lease
The residual value of a vehicle refers to its worth at the end of a lease. This value is calculated at the beginning of the contract and remains constant to its end. Model designs and other factors, such as demand changes, do not affect it. The amount of monthly payments you make is only tied down to the expected depreciation cost for the period in which the car will be under the lease. Your only task is to look for a vehicle that has an excellent residual value.
Low value in the long run
At the end of the leasing period, you have to return the car to the leasing company, leaving you with nothing to show for the payments that you made. If you want to maximize your investment value or are looking forward to owning the same car for more than four years, a lease would not be the best option for you. However, if you are used to upgrading your vehicle on the regular, then you can work with it.
Leasing a car doesn’t make you its owner. Therefore, you should expect it to come with conditions on how to use it. A majority of the leases come with a 10,000 to 15000 driving limit miles per year. Anything beyond the given distance might attract huge penalties. While this amount might be sufficient for most drivers, it can be easy to exceed the limits if you commute over a long distance or go on long road trips on the regular.
It is expensive in the long run
Leasing a car means paying to use it for two or more years. After the lease is over, you will have to either purchase one or lease another one. This means that you are going to have more years of paying monthly installments, which would have been avoided if you had bought the car at the first go.
No backing out
If you don’t need the car anymore, it might be hard to opt-out of the lease. It is like signing a rental agreement where you cannot just walk away from it. You will end up with stiff financial penalties from the leasing company. If you had bought a car instead, you would have the option of selling it if you don’t need it anymore.
You cannot customize the vehicle
Leasing companies have limits to the kind of modifications you can make to the car while under your custody. This means that at the end of the lease contract, you will have to return the vehicle in the exact state and configurations as you found it. They can only allow you to add manufacturer-approved accessories if necessary. If you like personalizing your vehicle, then leasing is off-limits for you.
Extra charges incurred
There are so many charges associated with leasing. For instance, you have to pay at least $400 in acquisition fee and at least $200 deposition fee at the end of the contract. You are also liable for an assortment fee that caters for the vehicle’s wear and tear while in your possession. You need to be extra careful when using the hired car because leasing companies usually charge high fees for small scratches.
Crazy insurance costs
Insuring a leased car is more expensive than you think. Most leasing companies require you to have full coverage for the vehicle, about $300,000 worth of liability coverage. You are also required to have a gap coverage that covers the difference between the amount owed to the lease company in case of an accident and the actual value of the car. You will also have a few insurance options to choose from, often forcing you to work with an insurance company that you might not like.
The decision on whether to lease a car or not is highly dependent on your personal preference. It is quite appealing in many different aspects but also has its downsides. You can check out a Greenville Ohio Chevrolet dealer for more information.