Why lease a car?

Why lease a car? It’s a very common (and wrong) opinion that in order to use a car you either have you buy it (with your own money or using a loan) or rent one at high cost. Also, many people mistakenly believe that leasing and renting are the same things. Probably, that’s why so few of us seriously ask Should I lease a car? Both, lease and loan are the ways to finance a car. However, these financial instruments work differently. A loan finances the purchase of a car, a lease finances it’s use. When purchasing a car, you have to pay it’s full cost plus loan interest and other charges. When leasing a car you have to pay only it’s deprecation (the difference between its current value and deprecated value at the end of lease term) and a finance charge similar to loan interest. Correspondingly, with a loan you become the owner of the car, with leasing you don’t, but you can buy the car at the end of the lease term. For many people, not being the lawful owner doesn’t seem attractive and many wonder why lease a car at all if I can’t own it? However, car leasing may be a very effective way to get the wheels you need so much when you are short of your own funds at the moment, especially when you need a new car.

Should I lease a car?

Yes, you should if the following is true:

  • Being the owner of the vehicle is not of principal importance, what you need is to use it at lowest possible cost
  • You have no down-payment funds or you want to avoid down payment
  • You want lower monthly payments than those your would have to make when financing your own car
  • You are not sure yet whether you want to purchase the car but still considering this option (leasing reserves this opportunity)
  • You want to use new cars and/or want to change them every 2-3 years so as to use new cars (for example, to sustain your company’s image or avoid higher maintenance costs associated with older cars).

Why lease a car if I don't get anything in return for my monthly payments?

This is a very wrong consideration - you DO get the use of the car. Yes, the money you pay for leasing a car won’t make you the owner of the it or even move you any closer to this. You can’t get this money back. However, should you lease or buy a car, 2 years later you inevitably and irretrievably lose THE SAME AMOUNT as you would have lost leasing a car for 2 years because resell value of the car decreases by the same amount (deprecation) you pay for leasing. If you want to keep that car you can buy that it for its deprecated value at the end of the period (if fact, off lease cars for sale are very good deals). But with leasing you don’t have to pay much in order to start using the car and monthly payments are lower. Not being the owner for the lease term in the only price you pay.

We hope with short article helped you understand basic advantages of leasing a car and answered the question why lease a car?