7 reasons to lease a car
If you’re ready to purchase a car, leasing can be the best alternative. It allows you to borrow whatever vehicle of your choice for a short but fixed period with a monthly fee—and in most cases, a down payment.
However, while many believe that leasing a car saves money, it can be quite expensive in the long run. Therefore, not everyone is the perfect fit for leasing, especially in this pandemic hit economy. But if you’re looking for flexibility and hoping to avoid the massive deprecation on cars—which quickly loses its value as soon as it’s driven off the lot—then, leasing would be the most logical option.
If you’re financing your lease with a loan, an auto loan calculator can help you keep track of payments and give you a full picture of what your financial obligation to the leasing company would be. According to J.D. Power, an automobile industry analyst, the percentage of people who have chosen to lease cars rather than outrightly purchase them has grown by over 20 per cent year-on-year.
One of the major benefits of leasing a car is that it allows you to drive a brand-new vehicle and only pay for its value depreciation. There are numerous leasing options in Canada, and you can always easily trade-in your car for a new model, colour or brand once your contract is over.
Before you decide on buying or leasing your next vehicle, here are some reasons that might help you decide if leasing is the best option for you.
- Low interest rates
Interest rates on automobiles vary widely, depending on several factors including model, brand, year and leasing terms. While leasing generally has higher interest rates than outright purchasing, sometimes, these rates can be similar and even lower.
There are now many no-interest loans that buyers can take advantage of and this reduces the total cost of monthly payments.
- Limited budget
If you’re on a tight budget, leasing a car can be very advantageous—especially with lower monthly payments.
Since the COVID-19 pandemic hit, many people have had to burn through their savings as a result of drastic changes in their financial fortunes. With very little money left to be used as a down payment for purchasing a car, leasing becomes the best alternative.
Most car lease contracts can be easily initiated with little or no down payment. For lease contracts that don't require an initial down payment, the monthly payments are higher but if it falls within your budget, it's still a viable option. You can even choose to lease a cheaper car just to keep your monthly cost within your budget.
- Shorter commitment
Just like how the pandemic caught many people and businesses unawares, no one knows for certain what would happen within the next few years.
Today, more people are becoming increasingly worried about their finances and job security; and the commitment to purchasing a car isn't as appealing as before. With car leasing, they get an affordable payment plan that doesn't entail them committing too much money. In fact, some leasing companies allow customers to transfer their contract to another person without any major penalties.
- Protection against depreciation
In part, leasing is based on what the predicted value of the car you choose is, at the end of the contract. However, in the automobile industry, cars depreciate quickly and no one can say for sure what a particular vehicle with be worth in the next five years. But therein lies the advantage.
Since it's impossible to be exact, you're only paying for an estimated value and whether or not the price of the car drops unexpectedly, that's the lender's problem. But there's also the option of buying the car and selling it for profit at the end of your lease period, should its value climb unexpectedly.
- Manufacturer's incentives
Every month, most car manufacturers offer customer's numerous incentives to make buying or leasing a car more affordable. There are many enticing leasing incentives available that you could take advantage of.
By searching the carmaker's website, you can see the available special offers, though most of them are time-bound. Lenders would adjust the terms of the leasing contract to reflect these offers and arrive at a much lower lease payment.
- Switching cars easily
If you're the type that like changing cars frequently or making upgrades to them, leasing offers some advantages over buying a new vehicle.
When you trade in cars, you're taking on new debt while dealing with the harsh reality of depreciation. However, studies have shown that it is more cost-effective to repeat lease than to repeatedly buy a new car every time you want an upgrade.
- Acts an insurance policy
Leading can be a sort of insurance policy for those who got a new vehicle that failed to meet their expectations or needs major repairs after an accident.
Since leasing is essentially a long-term rental, you don't incur any loss upon resale of the car unlike buying it outrightly. If you buy a car and damage it in an accident, insurance will definitely incur the cost of fixing the damages, but when the time comes to sell the car, you will have to sell it at a much lower cost than usual due to its already diminished value.
No buyer would be willing to pay the same price for a vehicle that has been in an accident. However, with leasing, even if you wreck your car, insurance will still cover the cost of repairs but the diminished value of the car is no longer your problem but that of the leasing company.