When it comes to getting a car, you have two options: purchase or lease. Each option offers its own advantages and drawbacks to every car owner.
While car leases can often be seen as a bad deal, a car lease can provide an array of benefits in certain situations. Before making any important decisions about getting your next car, it’s essential to understand what a lease is and the reasons why it could be the right choice for you.
A car lease: what is it?
Leasing a car is different than purchasing one. Instead of taking out a loan to cover the entire price of the vehicle, a car lease allows you to “rent” the vehicle for a predetermined amount of time.
With a lease, you are only expected to pay for the difference between its current price and what its expected price will be at the end of the lease. Of course, there are some added interest and fees added into that as well.
At the end of the lease term, the vehicle is returned to the dealership. Once returned, you can choose to purchase that vehicle for its depreciated worth, lease a new vehicle, or walk away altogether. Depending on your lease agreement, you may also be responsible for some fees and costs at return.
When leasing a car is a good option
As U.S. News points out, there are important factors to take into consideration with a car lease. Unlike a vehicle purchase, you do not own the vehicle. This means that the dealership can place limitations on mileage, expectations for maintenance, and the condition it must be returned in.
But even though car leases are typically judged harshly, leases can be great options for certain car owners, in certain situations. Here are a few circumstances where going with a car lease makes sense.
When the monthly payments are lower than a purchase
There are certain situations where your monthly payments could be less with a car lease than a car purchase. Not only do dealers often offer leasing deals on luxury vehicles, but depending on the car, a lease can cost you less money than paying back a loan for the total purchase price.
According to Investopedia, leases offer better savings in the short-term. Just like a purchase, however, your monthly payment will also depend heavily on the amount of cash you offer upfront.
When your taste for cars moves quickly or you only need a temporary fix
Most people look at car ownership as a long-term deal, but in certain situations, you may only need a car temporarily. Whether you need a car for a temporary job assignment or a family emergency that takes you somewhere else, a car lease could be a much simpler, and cheaper option.
When your need for the car is done, the vehicle can be returned. Car lease terms are often only for a few years at a time. This means it’s ideal for car enthusiasts who enjoy getting a new vehicle often. For owners that prefer driving the latest and hottest instead of the most affordable, car leases allow the freedom to keep choosing what you want.
When you can catch a really great deal
You’ll often find that throughout the year, dealerships and vehicle makers offer deals, promotions, and incentives on car purchases. The same is true for car leases, with some car dealers offering financing options at incredibly low rates, fees, and terms.
These are especially found with higher-end, luxury cars; making it more accessible and affordable to drive one. Because dealers can receive a higher return on the vehicle after the lease is up than with a vehicle purchase, incentives are often easy to find.
When the vehicle will be used for business
The lease payment on a vehicle you use for business can typically be deducted as an expense. According to Money Under 30, leasing works better than a purchase from an accounting standpoint.
As long as you take the proper precautions with itemizing your deductions and expenses, leasing your business vehicle could help cut down on your overall expenses.