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Automobile advertisements put your heart on full-throttle. The number of miles you drive has remained more or less the same each year, and you’re pretty good at maintaining your car regularly. You can hardly wait to fulfill your adolescent dream of having the latest model vehicle parked in your driveway every three years. Toss in an ability and willingness to make continuous car payments and you’d be the kind of person who could get more satisfaction out of leasing a vehicle than you would out of buying it. Indeed, it takes more than a desire to “get more car for less money” to make automobile leasing work for you.
When you lease a vehicle, you are paying for the use of the car, rather than paying for the car itself. Monthly lease payments are applied towards the projected cost of the vehicle’s depreciation over the duration of the lease, which typically runs two to four years. As a lessee, you will be responsible for maintaining the car and complying with the contract’s annual mileage limits. At the end of the lease period, you may either return the vehicle or purchase it.
Leasing has lured many prospective car buyers with promises of no down payment and low monthly installments. Unfortunately, some consumers dive headlong into the leasing pool without a proper understanding of how automobile leases work. Consequently, these consumers fail to reap the full benefits of leasing and end up paying more for the vehicle than they would have if they had opted to buy it instead. Nevertheless, leasing remains a more practical option than buying for consumers who fit a set of criteria. Thinking of leasing? Ask yourself the following questions before signing a lease contract.
Do you crave a new model every three or four years? If you get easily bored with a car after only two to three years of use, then leasing is worth considering. Car leasing lets you replace a vehicle every two to four years, depending on the term of the contract. If you like the vehicle enough, you have the option of purchasing it at the end of the lease. Otherwise, you return it to the lessor and move on to the next vehicle that catches your fancy.
Do you wish to take advantage of the cutting edge technology and safety features offered by the latest model vehicles? Monthly lease payments are generally lower than monthly payments towards purchase of the same vehicle. In many cases, you can lease a higher-model vehicle for the same monthly installment you would pay for a lower-end vehicle. Leasing offers you an opportunity to keep abreast with the latest in motoring technology.
Are you comfortable with the idea of making monthly payments continuously, without the benefit of actually owning the vehicle? Although you have the option of purchasing the vehicle at the end of the contract, doing so could negate the financial benefits you may have accrued during the lease period, since you would be asked to pay for the residual value of the vehicle, plus any interest and other fees.
Are you capable of maintaining your vehicle regularly and keeping it in good shape at all times? As a lessee, you are bound to keep the vehicle in good condition and free of excessive wear and tear. Failing to do so may result in being charged extra to cover repairs of even the smallest mechanical or cosmetic problems.
Can you restrict your driving to a pre-determined annual mileage limit? Automobile leases impose an annual mileage restriction, which can be anywhere from 12,000 to 15,000 miles per year. If you exceed this limit, you will be required to pay a predetermined amount for every excess mile.
Will you be using the vehicle for business purposes? Under certain conditions, you may write off a portion of your lease payments as a tax-deductible business expense if you have a legitimate business use for the vehicle. Consult a tax accountant about eligibility requirements for claiming monthly lease payments as a business expense.
If you answered “Yes” to three or more of these questions, then leasing may be right for you. Initiating and terminating a lease require substantial fees that may be offset only if you negotiate the terms of the lease to your favor and comply faithfully with the contract. Therefore, you need to be certain that you will be able to keep your end of the bargain in order to reap the full benefits of leasing. |
