More and more Americans are considering renting a car instead of buying one. There are a lot of differences between lease and purchase. Buying means that you own this car, while leasing, you are renting it from the dealer for a certain length of time. Why people choose to lease despite the pleasure of owning a car by themselves?
First of all, the monthly payments for a lease are usually lower than for a loan. Also, you can buy the vehicle at the end of the lease for a pre-arranged price.
Second, you don’t have to worry about maintenance. Many new cars offer a warranty that lasts at least three years, which includes most of the repairs. Leasing arrangements largely eliminate the hazards of a significant unforeseen expense.
Finally, if you use your car for business purposes, a lease will often afford you more tax write-offs than a loan.
Lease payments depend on factors including:
This is negotiated with the dealer, as with a vehicle purchase.
Length of the lease
This is the number of months you agree to lease the car.
The lease sets a certain maximum number of miles you can drive the car each year. Most leases come with a 10,000-mile annual allotment. The monthly payment will increase slightly if you go for a higher yearly mileage.
This is the value of the vehicle at the end of the lease, with its depreciation figured in. If you decide to purchase the vehicle once the lease expires, this is the amount you will pay.
This fee is shown as a dollar figure rather than a percentage, but it is the equivalent of an interest charge.
Taxes and Fees
These are added into the lease and affect the monthly cost.
However, there are disadvantages of leasing.
First of all, the car you rent doesn’t belong to you. In this case, it means you can’t sell the car or trade it in to reduce the cost of your next vehicle.
Second, the contract discourages any customization. In fact, the finance company may require that you reverse any modifications prior to returning it, which can be both a pain and an extra expense.
Also, if the car is totaled in an accident before the end of your lease, you may be liable for some costs not covered by your car insurance unless the lease includes car gap insurance. This type of insurance covers any costs that might be required before the lease expires, even if the car is scrap.