Why is it Better to Lease Than to Buy a Car?

| December 16, 2013

5 Ideas To Save Money On Your CarCar leasing is currently very popular, not only as a way of financing company vehicles, but also private ones. But what exactly are the reasons behind its popularity and why so many people choose it over buying? To answer all these questions, a throughout analysis of what lies beneath the term “leasing” is required, as well as a complex comparison of this method of financing to conventional purchasing.

Leasing is the opposition of buying – a lease contract is in fact a hire contract with some differences. To lease a car means, basically, to hire it for a set period, hence, a leased car belongs not to the person who uses it (lessee), but to the company that gets paid to allow the lessee use it (lessor). From this major fact other differences result and most of them prove, that leasing is in most cases the best way to get a car. What are these pros of leasing?

  1. You do not need to be ready to pay a huge sum upfront just to drive a new car, if you choose leasing instead of buying. In fact, the most important advantage of leasing is its availability, all you need to lease a car, is the ability to pay monthly fees. It is especially important for those people that want to start their own businesses and need vehicles as important tools, for example to deliver goods to customers or to carry essential equipment to their workplace. Of course, these people can choose buying a second hand, cheap car, but such an option has numerous disadvantage, for instance lack of manufacturer’s warranty, low reliability and safety. If you need a vehicle that will be used as your basic tool, you cannot afford cutting back on it and leasing is an optimal solution for you.
  2. It is much easier and simpler to lease a car than to buy it using a bank loan. While it may be hard to get a loan in some cases, a lease contract is a contract between two parties, none of whom is a financial institution (at least in most cases), so good credit history is not necessarily required. Moreover, a lease contract is relatively safe for the lessor, because if the lessee fails to pay the monthly instalments, the lessor will just repossess the vehicle, so dealerships are eager to sign these contracts.
  3. Car leasing costs about as much, as its depreciation. This means that monthly payments in case of a leasing contract are calculated basing on the cars depreciation, so you actually cover the difference between its initial cost as brand new and its estimated value at the end of the lease period. There are several consequences of this, the most important being the fact that you are treated fair and charged only for how long you actually utilize the vehicle. You will also not be surprised by unexpectedly low prices on the second hand market, when you at the moment you would like to sell your car.
  4. You do not have to worry about trading in your car, after it gets old. When the lease period ends, you can just leave the car at the dealership and sign a new contract to take a new vehicle. You also have an option to cover the rest of the cars value to purchase it, if you want to and can afford it. Leasing gives you freedom of choice.
  5. Manufacturer’s warranty covers the leased car for the whole lease period. Service of the car is not your problem, as a lessee, you just use it and leave caring about its technical condition to someone else. It is especially important for companies that have bigger fleets of vehicles – maintaining few dozens of cars on your own can be somewhat demanding. Moreover, each few years you can renew the lease contract, thus gaining access to a brand new vehicle. This way you can always use new, safe and reliable cars without wasting time, energy and money on trading cars each few years.
  6. Car leasing allows you to save money by reducing your tax. You are allowed to write off a percentage of the expenses for business use of the leased car. To do so, you just have to track the amount of time the vehicle is used for business and private purposes and then calculate the percentage of the expenses resulting from the business use of the car. This is not all, though. You can also deduct from the tax all other expenses related to business use of the car, such as its maintenance, fuel and servicing. Surprisingly, leasing more expensive cars actually makes sense, at least for companies, because the more expensive the leased car is, the higher sum can be deducted.

Concluding, in current circumstances it is much better to lease a car, instead of buying it. Obviously, this problem is much more complex than just six points, however they apply to the most of the cases.

Source – leasingpages.co.uk/category/car-leasing-knowledge-base 

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Category: Car Lease

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