A new car is a big investment. For many drivers, the prices may seem out of reach, even with a long-term car loan. However, there is another option. You could choose to lease your next vehicle. While many people prefer the traditional route of buying their new vehicle outright, there are actually many advantages of leasing that you may have never considered before.
What Is Leasing?
Leasing is similar to renting a car, except it's only for a period of two to four years. Rather than paying the full purchase price for the vehicle, you pay for the depreciation that would occur during the term of your lease in addition to the cost of the interest and fees.
You are typically required to pay a down payment for the car when you lease. However, many leases have smaller down payments than new car purchases, and other leasing contracts may not require down payments at all. The remainder of the cost is divided into equal monthly payments for the duration of the lease term.
What Are the Benefits of Leasing?
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In general, leasing a car is much more flexible than purchasing a car because you aren't locked into a long finance contract. Instead, you can choose to buy your car after the lease is over, or you can find another car to lease. Here are some other reasons why leasing can be more advantageous than buying a car directly.
Only Pay for What You Use
When you lease a car, you only pay for the depreciation that will occur during the time you're actually using it. This means that the cost of the lease is the value of the car if you were to purchase it directly minus the residual value, plus the interest and fees. You'll also have to pay the fees for registering the vehicle, just like you would if you were purchasing it outright.
As an example, let's say that you fell in love with a car that's $50,000. In three years, because of depreciation, the car will only be worth $30,000. This means that to lease the vehicle for a term of three years, you will only pay for the $20,000 in depreciation plus interest and fees. Those costs will then be divided equally into 36 payments. By leasing this $50,000 car, you only pay for the $20,000 in value that you're actually using, which typically means lower car payments.
Advanced Car Technology
New car technology is always being developed, from advanced driver-assist features like lane-departure warnings and adaptive cruise control to cars that are even equipped with artificial intelligence. Because many drivers own their cars for five or more years before they trade for a new one, it may be years before they get to enjoy some of the latest advances in technology, features that can actively keep them safer when they're on the road.
Even when they do trade, they may not be able to afford the fancier car with better tech features. This is especially true if you need to purchase a used car to accommodate a smaller budget. You likely will have to sacrifice the better technology.
However, leasing solves this problem. Not only does it allow buyers to purchase luxury vehicles with lower car payments - because they're leasing a brand new vehicle every two to four years - but those vehicles are also equipped with the latest car technology to make driving safer, easier, and more enjoyable. You may even be able to drive a more expensive hybrid model, which could save you a significant amount of money on gas during the duration of your lease.
Lease Warranty Coverage
Another benefit of leasing is that, unless you have an unusually long lease agreement or go far over the mileage limit set for the contract, you will most likely be covered by the car's factory warranty for the entire lease. This means that you shouldn't have to worry about coming up with the money to pay for significant warranty-covered repairs. The dealership should be able to take care of them at no cost to you. Routine maintenance may also be covered for the term of your lease, which means that the cost of the lease will be stable and predictable.
Lower Maintenance Costs
Car ownership can get expensive, especially as your car starts to age. Tires, brake pads, and other parts need to be replaced to keep the vehicle performing well and keep you safe when you're on the road. These maintenance costs can get expensive. The average price for a new tire is $148, which means that you can expect a new set of tires to cost around $600, maybe more.
However, these aren't expenses you will typically have when you lease a vehicle. You usually won't have the car for long enough to wear out a set of tires or other standard parts during the term of your lease.
Simple Process
Buying a new vehicle can be a hassle. However, this typically isn't the case when you're leasing. At the end of your lease, you simply return the car to the location you leased it from. You'll likely have to complete some paperwork and possibly pay some fees, particularly if there is any damage or if you went over the allocated mileage. However, you won't have to haggle with the dealership over the car's value. The value was set at the beginning when you first leased the car. Most likely, you'll just move forward with picking out your next lease.
Save on Sales Tax
While taxes can vary from one location to the next, leasing a vehicle can save you a lot of money in sales tax. In some locations, you may only be required to pay sales taxes on the money you pay for the down payment as well as the total of the monthly payments for your contract. In other words, you may only have to pay taxes on the amount of the car that you use.
With that said, in some areas, you might be required to pay sales tax for the entire price of the vehicle as if you're buying it. Before you move forward with leasing, you may want to check with a tax professional who's familiar with the laws in your area to help you understand what your tax liability will be.
As you can see, there are many advantages to leasing a car. If you're considering leasing and in the market for a new vehicle, stop by Kings Toyota in Cincinnati today. We have a large inventory of new vehicles, and our sales team is eager to help you find the perfect car to meet your needs.