Leasing may be an option for you. Leasing allows you to drive a car for a few years, and then trade it in for a better model, all the while paying lower payments each month. The downside to leasing is that you must return the car at the end of the lease period and find an alternative to the car you have been driving.
The advantages to leasing
- 1. You may not need to provide any money up front at all. You may be able to trade in your old vehicle and reduce your monthly payments.
- 2. There will be lower monthly payments than if you took out an auto loan, and when your lease runs out, you can swap your car for a newer model
- 3. You can drive a better car for more money
- 4. You can update your car to a newer model whenever your lease expires
- 5. You can lease your car for the term of the manufacturer's warranty, so if something goes wrong with the car, it is covered.
- 6. Some lease deals include change of tires or other repairs free of charge.
- 7. Lower tax. You don't pay sales tax on the entire value of the vehicle, just on the value of the amount of the car you use during the period of the lease. The tax you do pay is incorporated into the monthly payments of the lease.
The disadvantages to leasing
- 1. Once the lease runs out, you must return the car to the dealer and you will need to replace your mode of transport.
- 2. You will be tied into paying the lease for a number of years.
- 3. You can only drive a certain number of miles. 10,000 - 15,000 is the standard number of miles that you can drive in a year. Anything over this amount will incur excess mileage charges when the lease expires.
- 4. You can't terminate the lease early. If you do have to, you will have to pay termination payments as well as the remainder of the monthly payments that you are contracted to.
A lease requires little or no money up front and offers lower monthly payments. But when the lease ends you are left without a car and a need to replace it.
Buying a car is more expensive initially and the monthly payments are higher. But at the end of the loan, you will own a car you can still drive or sell.
Leasing a car is like renting a car - but for a longer time period. Unlike buying, you never actually own the car and you have to give it back at the end of the lease. Leasing became popular in the 1990s because cars became too expensive to buy for many people. It can work well if you are self employed and can write the costs off as a company expense. Leasing allows a person to drive a brand-new car and make lower monthly payments, thus making the "new-car experience" more accessible to more people. Finally, leasing can offer tax breaks for certain occupations.
It is possible to lease cars for two, three, four or five years. However, the three-year lease is the best choice for most people. The majority of carmakers offer three-year bumper-to-bumper warranties. If your lease is for three years you will always be under warranty without paying extra for an extended service contract. Furthermore, a car really begins to show its age at about three years - right at the time the lease is expiring. Remember, one of the reasons for leasing is to drive a new, or nearly new, vehicle on a constant basis. Why would you lease for five years and be forced to deal with extended warranty fees and higher maintenance costs? If paying for these items doesn't bother you, maybe you should consider buying the car.
Of course, everyone wants low lease payments, and extending the length of the lease will drop the monthly cost. But extending the lease means you're investing more and more money into a vehicle that will never be yours. It's better to shop aggressively for a competitive lease deal and keep the length of the contract to three years.