The ins and outs of leasing your next car
Pay as you go; this is a term many of us are familiar with as consumer trends shift towards only paying for the portion of a product used rather than the product as a whole. This has given way to companies with missions based around renting out premium goods to increase accessibility. Companies such as Zip Car are great examples of this as they only charge members for the amount of time they use a car making it easier for people to navigate life without owning a vehicle of their own. Leasing is based on a similar principle as it allows you to pay for the portion of the vehicles’ life you will be using rather than the total cost, providing the consumer with more car for less money.
With leasing, your dollar will stretch further than finance payments will, on average, be around $150 more per month than a lease on the exact same vehicle. Other advantages include tax incentives as well as the ability to lease a vehicle through a business using pre-tax dollars. These can all add up to decrease the amount leaving your bank account as you drive off in a new vehicle.
One of the major benefits of leasing is being able to put little to no money down. Putting money down can be nice, especially if it helps get to a monthly payment that you are more comfortable with, but it is not necessary. On the other end, for clients financing I often suggest putting between 10% and 20% down on a vehicle so when it comes time to trade it in, often at 36 months (which is also very common lease term), the chances of having positive equity in the vehicle will be greater as you have paid for more of the vehicle’s life than you have used leaving you with positive equity. This is another aspect that completely disappears with leasing as fluctuations in the market are irrelevant as you will always have the ability to walk away from the vehicle.
A common concern of leasing candidates is that they are too hard on their vehicles and are worried about the expenses that can come if there is wear and tear that is not considered ‘normal’. This should not be a major concern as there are many programs that will cover these expenses. For example, Lincoln offers ‘Wear Care’ which can only cost a couple dollars a month and can protect you against a vast range of possible wear.
Having a set cash flow each month is also much easier with leasing as you will not need to account for maintenance and repairs that crop up as a vehicle ages. With the majority of costly repairs occurring after warranties have run out, there becomes a need to set aside a ‘car repair fund,’ so when they do occur, the cost doesn’t completely disrupt your monthly cash flow. These contingency budgets disappear with leasing as a leased vehicle will always be under warranty; meaning you get the best years of a vehicle without the expensive repairs that come once a vehicle is no longer under manufacturer warranty.
With the average consumer owning a vehicle for 36 months, the benefits of owning a vehicle outright don’t really apply. A vehicle is worth purchasing if it is a long-term purchase that you plan on keeping once it is fully paid off. However, with the increasingly complicated technologies being packed into vehicles today, it is making less sense to own a vehicle as repairing and replacing electronics can cost thousands when the vehicle warranty has run out.
Automobile technology is evolving faster than ever inside and out with smaller, more efficient combustion engines that are quickly going out of fashion as they make way for all electric motors. While engines have been making strides towards efficiency, convenience features have been striving to anticipate virtually any need or desire you could have while on the road. Need cooled and heated cup holders, what about massaging seats, is on-board WIFI a must for trips to the cabin, do you want your car to Parallel Park itself? The good news is these are readily available features with new ones flooding the market at on a nearly daily basis.
So, if you like to have a set budget, prefer lower payments, don’t like to put money down, or just never want to worry about whether you will have costly repairs, leasing may be just the thing for you.