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In spite of its surging popularity,
numerous misconceptions about vehicle leasing remain:
Misconception #1: Leasing a new car costs far more than buying
it.
Leasing can actually cost less in the long run. Besides the lower up
front costs and monthly payments of leasing, consider the economic power
of money that's not put into the down payment and large monthly payments
on a purchase deal. Investing that money or buying down debt could put
you ahead financially, compared with tying up money in a vehicle, which
is losing value.
In addition, most leases offer GAP insurance, which covers the
difference between the lease payoff and the insurance settlement if the
car is totaled or stolen. This is usually not available when you buy a
vehicle.
Misconception #2: There's equity in buying, but nothing at the
end of the lease.
Buying a new car is not typically a good investment, since the vehicle
depreciates. Its value may be considered equity only if the amount owed
on the loan is less than its value.
Leasing offers the potential for cash value at the end of its term as
well--by keeping your equity out of the vehicle. The cash flow derived
from no or a lower down payment and lower lease payments during the life
of the lease, together with interest, can produce an amount roughly
equal to the used vehicle's value at the end of a conventional loan.
Misconception #3: A lease consigns you to always making
payments.
At the end of most leases, the contract entitles you to buy the vehicle
at a set price. If you choose not to, you can just walk away. Had you
purchased the car, you would be stuck with selling it or trading it in,
at a price that may not meet your expectations.
Misconception #4: There are additional expenses at lease end.
If all requirements concerning vehicle condition and mileage are
fulfilled, there is no further obligation at lease end. You may simply
walk away, purchase the vehicle for a predetermined value or lease
another vehicle.
Misconception #5: Excess wear and tear charges are unfair.
Regardless of leasing or buying your vehicle, you would face the same
financial hit for wear and tear. The lease contract just puts that
reality in black and white.
Misconception #6: Early termination fees exact a heavier penalty
than changing your mind when you buy a car.
Whether you lease or take out a loan, the decision to bail out early
comes at a price. If you purchased the vehicle, the loan balance may be
far more than what the car is worth. If you leased, the vehicle may be
worth far less than its residual value, particularly if you made no down
payment. The lessor uses the early-termination fee to compensate for
that loss.
Misconception #7: It's a mistake to lease if you put high
mileage on a car.
High mileage takes its toll whether you lease or buy. When you buy, the
cost comes as a lower trade-in value. When you lease, your cost is out
of pocket when you turn in the car. To avoid such an expense at the end
of a lease, NationsLeasing will structure your lease to your driving
habits using a realistic number of miles over the right number of
months.
Misconception #8: Leasing only makes sense for vehicles used in
business.
The Tax Reform Act of 1986 removed the incentives for individuals to
purchase their vehicles, since buying no longer offered deductions for
sales tax and consumer interest. As a result, leasing is definitely a
viable option for personal use drivers who change vehicles every few
years.
Misconception #9: The only way to dispose of your current
vehicle when you lease is to sell it yourself.
Lease Compute can secure the best possible price for your trade-in
vehicle at no cost to you.
Popularity Explosion - Leasing has grown more than tenfold in less than a decade. It accounts for more then 36% of the over 15 million vehicles sold in the United States each year. Why the dramatic upsurge in leasing?
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- Less money down
- Leases structured for tax benefits
- Lower monthly payments
- All types of credit can qualify
- Any vehicle, new or used
- Negative equity recovery leases
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