Unlike financing a car, leasing a vehicle is when you pay for the portion of the car that you’re using over a set amount of time. Leasing has increased in popularity over the years, and taking away the hassle of an extended-term auto loan makes leasing an attractive alternative. When considering a lease, borrowers should understand the benefits of leasing.
Is it a Good Idea to Lease a Car?
Leasing isn’t for everyone. Those who put a lot of miles on their vehicles might not want to risk going over the mileage limit of a lease, as this can add substantially to the cost. But if you find that leasing works for you, there are several advantages that leasing has over financing:
Cost Benefits of Leasing a Car:
- Lower monthly payments – Because the lessee isn’t paying for the entire vehicle, monthly payments for a lease are lower versus a traditional car loan. Depending on the lease, monthly payments can be anywhere from 30 to 60 percent lower compared to taking out a loan for the same term.
- Less money upfront – Because a down payment isn’t needed, or even required, a lessee doesn’t need to pay more money upfront on a lease. But, if they want to use trade-in equity or prepay the lease with a cash down payment (both of which lower the monthly lease payment), the leasing company won’t stop them from doing it.
- Sales tax – Unlike financing, you pay tax on your monthly lease payments in most states, instead of the entire purchase price of the car, which saves lessees a lot of money.
Maintenance and Service Advantages of a Lease:
- GAP coverage included – Most leases include free GAP coverage that covers the difference between the balance owed on the lease and the vehicle’s actual cash value (ACV) in case it’s totaled or stolen. Traditional auto loans generally don’t come with GAP protection included, it needs to be purchased separately. GAP coverage for an auto loan can range anywhere from $200 to $1,000 over the loan term, depending on the car, the level of coverage you choose, and where you get coverage.
- Less maintenance stress – Because most leased vehicles are covered by the manufacturer’s warranty during the entire lease term, worrying about maintenance costs isn’t an issue. While each manufacturer’s warranty is different, in some cases, the warranty also covers perks such as routine scheduled maintenance.
Flexibility and Options with Leasing:
- Options at lease end – Once the lease term is complete, the car can either be dropped off at the dealership or, if the lessee ends up loving it, they have the option to buy it for a fixed price. Here’s where it gets interesting. If it’s ACV is more than the buyout, they can sell it and make a profit. If the ACV is less, they may be able to negotiate a lower buyout price with the lessor.
- Keep driving a new car – One of the big advantages of leasing is you’re always driving a new vehicle. In addition to that “new car smell,” you’re also getting latest and greatest technologies and safety features. If having a new vehicle every few years is important to you, leasing is typically the most affordable way to go.
- Shorter terms – Car leases are famous for their short terms of usually anywhere from 24 to 36 months, whereas traditional auto loans now easily extend beyond 72 months. Short-term car lease options can provide lessees with more freedom, while avoiding a long-term commitment.
Looking to Lease Your Next Car?
If you’re considering leasing your next car, check out the best lease deals for the current month. You can find all of the information you need on vehicles available for leasing, find the best deal that works for you, and even get a custom lease quote! If you’re considering leasing, CarsDirect wants to help you find the right car for the best price.