The two conventional ways of getting a new car are leasing or financing. While financing includes either paying the full amount of the car or taking out a loan for the same, leasing involves renting a car from its owner for a specific period and a certain monthly installment. Each come with their own pros and cons, but there are some situations when car leasing is better than financing. Let’s have a look.
When You Can’t Afford Large Payments
You may wonder when leasing a car is better than financing one. For one, when your monthly cash flow is less. If you’re leasing a car, the monthly installments consider the depreciation of the market value of the car. Therefore, these monthly payments are lesser compared to auto loan installments.
When You Change the Car Every Year
Leasing gives you the freedom of choosing a new car for yourself every year. After the lease contract expires, you may opt for a new model without any worry. However, this is not possible with financing as you own the car. There is also a lot of hassle involved in finding buyers if you want to sell or trade-in the car you have financed.
When You Want to Maximize Tax Deductions
The IRS allows you greater tax write-off if you are using a leased car for business purposes, as they deduct both the depreciation cost and the financing cost from your monthly installments.
When You Want To Pay Less For Maintenance
Most new cars come with a warranty of three years. So, leasing a brand new car will allow you to cover the repairs or maintenance costs under the warranty. If you were financing the vehicle, you would continue to pay the monthly installments well after the warranty period has expired, and any cost of repairs would come from your own pocket.
When You Considering Overall Costs
For those who wonder how or when is car leasing better than financing when the loan termends. However, these people forget to calculate the depreciation cost of the vehicle. At a certain point in the loan term, you continue to pay monthly installments while the warranty of the car has expired. Not only do the car repairs and maintenance costs come from your own pocket, but the car is depreciated greatly in value too. Selling it, in the end, may also become difficult, and it might not even fetch a good price.
When You Don’t Drive Much
One of the main drawbacks of leasing a car is that the owners may specify a set amount of miles that you cannot exceed. Some charge extra if you drive over 10,000 or 15,000 miles. So when is car leasing better than financing? If you drive less than this amount year-round, leasing a car may be the best option for you.
Also, if you are planning or staying in a country or city for a short time, say a year or two, it is best to lease a car instead of spending a fortune on down payments and loan installments. Remember that you need to be wary of getting out of a lease before the contract is up, as you may end up paying a penalty.