Category: 
April 9, 2009
Despite aggressive low-interest financing, cash-back offers and other
purchasing incentives offered by leading auto-makers to buyers, leasing
numbers keep increasing steadily over the years. Leasing is not only an
attractive financial proposition to most auto-consumers, but also a
lifestyle and preference choice.
Benefit Number 1: Keeping up with the latest trends
Leasing is sometimes more of a personal and lifestyle choice than a
financial one. Many people are not comfortable with the idea of owning a
vehicle over a long period of time. Theyâd rather keep up with the latest
trends of the industry and drive the latest models every two to three
years.
Leasing a car gives you the convenience of having the latest technology
and safety innovation, such as an electronic stability system, DVD
entertainment systems and advanced stereo equipment. If you are willing to
forego ownership for the latest set of wheels, than leasing is your best
option.
Benefit Number 2: Purchasing Flexibility
Leasing also offers purchasing flexibility: it allows you to defer the
purchasing decision while using the car. You donât have to haggle with your
mechanic over repair expenses, deal with hefty maintenance bills or worry
about a depreciating asset. Provided you can keep the vehicle in good
condition and stay within the contracted mileage allowance, youâre
effectively getting a test drive for the length of your lease.
At the end of your lease, you can purchase the vehicle or simply turn in
the keys and walk away. No questions asked.
Benefit Number 3: Cash Flow
Leasing offers many short-term benefits. It reduces your initial cash
outlay as you do not have to pay the large down payment required for car
ownership. You only pay for the depreciation on the car - only the part you
will use during your lease, not the entire vehicle. This results in lower
monthly payments and frees even more cash. This cash can be put to use more
intelligently elsewhere than the questionable investment of owning a
depreciating asset. If you are self-employed or use your car for your job,
then you can write off your leasing payment as a business expense.
Benefit Number 4: Negotiating Leverage
Although it may seem a little unorthodox in this industry, almost
everything about leasing is negotiable. If you know all the fees involved,
you can lower your monthly payments, negotiate the purchase price of the
vehicle at the end of the lease and contract additional miles on top of
your mileage limit. You can also do some shopping around and compare deals
from different auto-insurers to get the cheapest GAP insurance for your
lease.
Matthew Meyer
http://www.articlesbase.com/technology-articles/benefits-of-leasing-87185.html
Horaayy..there are 4 comment(s) for me so far ;)
Leasing a vehicle as opposed to purchasing with a monthly payment.What are the benefits to leasing?Taxes, etc?
What are the benefits to leasing as opposed to purchasing? My husband needs a new vehicle, and I'm unsure as to what is the best option. He is self employed.
It is never a good financial idea to lease, unless, your company is reimbursing you for it, you have tons of money to throw away or your like driving a new car every 3 years.
some leases can be very bad.
I suggest buying the car you want, right now you can get a GREAT deal if you bargian, get pre approved at a local credit union and go in with you financing in your pocket, don't tell them that until you have bargained down to the bottom price. Then say I already have my financing…
you need to keep track of his business expenses on the car, mileage, and Depreciation for tax purposes, when ever a car is use even partially for business purposes, your tax consultant can give you details on what to keep record wise.
References :
The down side to leasing is the mileage. If you drive a lot you will get killed in excess mileage charges.
As for writing it off, its about the same. 100% of the lease payments. If you buy you write off %100 of the cost over a few years (around 5).
If your looking to save money then buy used, maybe 1-2 years old from a priviate party.
References :
The primary difference is that leasing payments are a lot less than when buying with a loan. The tradeoff is that you don't pay extra money each month to gain ownership equity. Here's some other differences:
MONTHLY PAYMENTS
> Leasing - Monthly lease payments are roughly 30%-50% less than loan payments for the same car, same term because you only pay for the vehicle's predicted depreciated value, not the entire value. The average vehicle will depreciate approximately 50% in three years.
> Buying - Monthly loan payments are higher because you pay for the entire cost of the vehicle, which includes the depreciated value. The average vehicle will depreciate approximately 50% in three years.
PAYMENT DUE DATE
> Leasing - Payments are due at the beginning of the month. Your first lease payment is due at the time you sign your lease contract.
> Buying - Payments are due at the end of the month. Your first payment is due one month after you sign your loan contract.
DOWN PAYMENT
> Leasing - Leasing does not require a down payment ("cap cost reduction"). However, some special lease deals may require a down payment in order to get the deal. Making a down payment lowers the monthly payment.
> Buying - Buying with a loan usually requires a down payment, as much as 20%. Making a down payment lowers the monthly payment.
UP-FRONT COSTS
> Leasing - Typically includes: down payment (if any), first month's payment, taxes, registration fees, and possibly a security deposit.
> Buying - Typically includes: down payment, taxes, and registration fees. No security deposit is required.
SALES TAX
> Leasing - Sales tax is based on and paid with monthly payments (in most states), instead of all up front on the entire value of the vehicle. This saves money for the leasing customer.
> Buying - Customers pay sales tax on the entire purchase cost of the vehicle up front, but is usually rolled into the loan as an extra cost. If the customer sells the vehicle later, there is no partial sales tax refund. If he trades, there may be a tax refund — in some states.
SECURITY DEPOSIT
> Leasing - Leases sometime require a security deposit, which is returned at lease-end. The amount of the deposit is typically about the same as one month's payment. Customers with good credit often don't have to leave a security deposit.
> Buying - Security deposits are not required, although down payments are usually required, unlike leasing.
OWNERSHIP
> Leasing - Since leasing is designed to only pay for depreciation (with lower payments), you don't build ownership equity. You return the vehicle to the lease company at lease-end, or purchase your vehicle for it's depreciated value.
> Buying - By making higher payments, you not only pay for depreciation but also build up ownership equity. At the end of your loan, you receive the title and own the vehicle. It's value, however, has depreciated and your ownership equity is significantly reduced.
INSURANCE
> Leasing - Laws in most states require you to have insurance. Lease companies require that you pay for insurance on your leased vehicle. The level of required coverage may be higher than is required by state laws.
> Buying - Laws in most states require you to have insurance. Loan companies may require you to have a minimum level of insurance to protect their interest in the vehicle. The level of required coverage may be higher than is required by state laws.
MAINTENANCE
> Leasing - Lease companies require that you keep your vehicle in good condition and maintain it properly. You are not required to have your maintenance done by a dealer.
> Buying - You are free to maintain, or not maintain, your vehicle as you like. However, if you expect to possibly sell or trade your vehicle in the future, the buyer may be interested in how the vehicle was maintained.
GAP INSURANCE
> Leasing - Most leases come with automatic GAP coverage, or a waiver, that pays off your lease if your car is stolen or totaled in an accident. It makes up the difference (gap) between what your insurance pays and the amount still owed on the lease.
> Buying - Loans do not come with GAP insurance. It must be purchased separately. If you will be upside down on your loan, which is very common, and should have GAP insurance to protect yourself in case of insurance shortfall if your car is stolen or totaled.
EARLY TERMINATION
> Leasing - The cost of early lease termination can be expensive due to the fact that your low monthly payments do not keep up with the rapid depeciation of your vehicle. You nearly always owe more on the lease than the vehicle is worth, until near the end.
> Buying - Ending a loan early by selling or trading can be expensive because payments may not have kept up with the rapid depreciation of your vehicle. You may be upside down, which means your still owe more on your loan than the vehicle is worth. This can happen if you rolled another loan balance into your current loan, made little or no down payment, or have a long-term loan.
END OF TERM
> Leasing - You can return your vehicle to the lease company, or purchase it for the price specified in your lease contract. Some fees may apply (see below).
> Buying - You own the vehicle and may choose to 1) keep driving it, 2) sell it for its depreciated retail value, or 3) trade it for its depreciated wholesale value. No fees are required at end of loan.
END CHARGES
> Leasing - Most leases require a "disposition" fee at lease-end as a kind of administrative fee for handling the return of the vehicle. The amount is typically about $350. The fee is not required, usually, if you choose to buy the vehicle at lease-end.
> Buying - There are no fees or charges at the end of loan.
MILEAGE FEES
> Leasing - Typical leases allow 10,000 to 15,000 miles per year. Additional miles may be purchased up front. Excess miles are charged at a rate of 15-25 cents per mile to compensate the lease company for the extra depreciation.
> Buying - Since you will own your vehicle at the end of your loan, any extra depreciation caused by high mileage is reflected in reduced resale or trade value for your vehicle. Miles aren't free, regardless of whether you buy or lease.
WEAR AND TEAR FEES
> Leasing - If you have damages or excessive wear and tear at lease-end, you will be charged by the lease company for the repairs to restore the car to a good resellable condition. It's better and less expensive to have the damages repaired yourself before returning your vehicle to the lease company.
> Buying - Since you will own your vehicle at the end of your loan, any extra depreciation caused by damages or excessive wear and tear are reflected in a reduced resale or trade value for your vehicle.
DEALER PROFIT
> Leasing - Dealer profit comes primarily from the negotiated sale price of a vehicle. Many customers don't realize that lease prices can be negotiated and therefore give the dealer more profit than necessary.
> Buying - Most customers know that prices can be negotiated when buying, but often don't. Fundamentally, buying and leasing offer a dealer the same profit potential.
BUSINESS / PERSONAL USE
> Leasing - Leasing offers similar benefits for both personal and business vehicle use. Business users can deduct lease expenses from taxes. Personal users cannot deduct.
> Buying - Buying is not as convenient for business users, who can deduct vehicle expenses, but not quite as easily as with leasing. Personal users cannot deduct.
FINANCING SOURCE
> Leasing - Dealers don't finance leases. They hand off lease financing to the manufacturer's finance company (Ford Motor Credit, GMAC, etc.) or a national bank. The finance company pays the dealer for the car and works out payment details with the customer. Independent lease sources are difficult to find.
> Buying - Dealers don't finance loans. They hand off loan financing to the manufacturer's finance company (Ford Motor Credit, GMAC, etc.) or a national bank. The finance company pays the dealer for the car and works out payment details with the customer. Independent loan sources are easy to find.
INTEREST RATES
> Leasing - Interest rates are about the same as for loans, and depend on your credit score. Lease rate is called "money factor" and can be converted to APR by multiplying lease rate by 2400.
> Buying - Interest rates are about the same as for leases, and depend on your credit score.
CREDIT REQUIREMENTS
> Leasing - Requires you have a good credit score, income, and reasonable debt. Lower credit scores will require a higher lease rate, and possibly a down payment and security deposit.
> Buying - Requires you have a good credit score, income, and reasonable debt. Lower credit scores will require a higher interest rate and higher down payment.
FINANCE COSTS
> Leasing - Total finance charges are usually higher for a lease than for a purchase with a loan. Low payments are slow at paying down the lease.
> Buying - Total finance charges are usually lower for a loan, assuming the same term. However, most loans have longer terms (in months) than most leases, which evens out total cost.
CALCULATING MONTHLY PAYMENTS
> Leasing - You can use an online lease calculator such as the one at http://www.LeaseGuide.com/calc.htm
> Buying - You can use an online loan calculator such as the one at http://AutoLoanCalculatorOnline.com
References :