The Pros and Cons of Leasing your New Car
When you acquire a new vehicle, you have the option of purchasing it outright or leasing it for a specific period of time. While you still get the same warranty and other protections when you lease, there may be drawbacks to leasing that make buying a vehicle a better option. What are some of the pros and cons of opting for leasing your new car?
Pro: You Can Write It Off Of Your Taxes
If you run your own business and use the vehicle partially or solely for business purposes, you can write off the cost of the lease payment as a business expense. You can also take a mileage deduction for each mile that you drive for business.
When you buy a vehicle, you cannot write off the cost of the monthly payment and are limited to deductions for miles driven for business purposes.
Con: You May Need to Put Money Down upon Signing
When you buy a vehicle, you can generally have the tax, license and other fees rolled into your loan. However, the dealer may require that you make your first payment as well as pay other fees prior to signing the lease.
Therefore, you could pay thousands of dollars without building any equity in the vehicle. If you are strapped for cash and don’t have a trade-in, you should opt to buy if you can’t get upfront costs rolled into your monthly lease payment.
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Pro: You May Cash out Equity When the Lease Expires
At the end of the lease period, the car has a set value known as the residual value. This is calculated based on the assumption that you will drive the maximum number of miles allowed in the lease.
If you drive fewer miles than your lease calls for, your car may be worth more than the residual value. When you turn in your vehicle, you may be entitled to a check for the difference. Alternatively, you may be allowed to put that equity toward the purchase of that vehicle or another of your choosing.
Con: You Pay for Each Mile Above Your Lease Allotment
If you like to drive thousands of miles per month, you are not going to benefit from a lease. While you can always buy more miles before signing the lease, it may push the cost of the lease higher than what you would pay to simply buy the car outright. You should also be aware that driving additional miles could contribute to extra wear-and-tear on the vehicle that you may have to pay for.
Pro: Lease Payments are Generally Lower for Newer Vehicles
The best reason to lease a vehicle is the fact that the payments are generally lower on a new model year vehicle. This means that you can drive new cars with all the features that you want or need without breaking your budget. If you are a business owner, it may make sense to lease a luxury vehicle and use it as an incentive for employees who perform well.
Pro: Leases Offer More Flexibility
The typical lease will only run two or three years, which means you aren’t married to the vehicle for the long-term. When the lease expires, you simply turn it in without any future obligations. If you aren’t happy with the vehicle before the lease expires, you can always transfer it or trade the vehicle if the numbers work.
Leasing a vehicle is a viable option for many people. However, whether it is the best option for depends on your finances, driving habits and whether or not you want to keep your car for more than three years at a time.
Informational Credit:
The information for this article was provided by Findlay Automotive, an auto dealer that specializes in selling new cars in St. George.
Category: Car Lease
