Why should I lease?

Before we even attempt to answer this question, you need to decide why you are purchasing a new or used car and what driving habits you have. Choose which of the three leasing types below applies to you:

Type 1: I need a vehicle for my business.
This is probably the most popular reason people choose to lease. For a business or commercial lease, the payment can be listed as a monthly expense that can be deducted for tax purposes. It also doesn’t show up on your balance sheet as a liability.

Type 2: I always seem to have a car payment.
Most people that drive a car fall under this category and it’s one of the best reasons to lease. See if this sounds familiar:

You finance a car for a given term and, for whatever reason, you want or need to get out of it before you’ve made all of your finance payments. You consider selling the car, but realize you owe more than it's worth. Trying to trade your car into the dealership and come out even is difficult. That is called negative equity and this cycle can repeat itself indefinitely.

To break the cycle, you can lease that same vehicle for a shorter term than necessary to purchase the car. Likely, your monthly payments would be less and you would simply return the car back to the lessor at the end of the term and get another one.

You may be thinking: “But I want to own my car.” If that were true, then you should get a traditional loan, make all your finance payments and keep the car until the wheels fall off. But, if you buy another car immediately after paying off your original car, you still would have been better off leasing as stated above.

Type 3: I like to drive the latest new model.
If you want to change your car when new models and body styles hit the market, then leasing is perfect for you. It eliminates concerns that first-year cars will face recalls, you’ll tire of a certain type of car or that its market value will drop if its sales are less than expected.

Leasing gives you the opportunity to try a car out for a shorter period of time without exposing yourself to the negatives. When leasing, if the actual value does drop below market value then you are not stuck with the negative equity. Leasing gives you a guaranteed value for the vehicle at lease end (residual value).

In addition to the types above, there are other reasons leasing may be right for you:

Get more car for the money
Because leasing usually has a lower monthly payment than traditional financing, some people can choose to lease a more expensive car.

No down payment
Depending on your credit, leasing usually does not require a down payment. In fact, you will learn later on in this publication why you should NEVER put money down on a lease.

Lower sales tax
In most states you will only pay sales tax on the monthly payment and not on the whole purchase price. The higher the price of the car the more you will save.

No comments: