“Lease or finance?”

People ask me this question every day.  As a well seasoned Salesperson, it comes with the territory. And as a thought leader in the Automotive Sphere, you can count on my objectivity when providing answers.

 

Back in the day car finance was the best option. Not now. The escalating cost of vehicles plus the trend to maximizing return on assets now suggest that leasing is the common sense choice for most consumers. Read on and you’ll see the facts are quite conclusive!

 

Yet there are some people for whom financing is the best, or in some instances, the only option. I’ll cover this later.

 

So let’s get right to it! Here are 17 reasons why, for most consumers, leasing is the smart way to go:

 

  1. You have use of the vehicle in its best years

Leasing will ensure that you’ll have use of the vehicle during the best part of its life. This helps you avoid costly repairs and you’ll get the latest safety and technology features.

 

  1. The vehicle remains under warranty

Having the vehicle covered by warranty for the duration of ownership gives cost certainty and fewer unexpected repair expenses. Plus repairs are

done at a factory-authorized facility using original, not generic parts.

 

  1. Lower downpayment

Leases requires lower down payments, freeing funds for other things.

 

  1. Lower monthly payments

You’ll get lower payments with leasing — that’s less stress on your budget.

 

  1. Guaranteed term end value

Leasing has the advantage of offering a guaranteed residual value when the lease ends. That way you are not at the mercy of fluctuating market conditions.

 

  1. Meets your needs better

Leasing allows you to buy more car for your money.

 

  1. Better absorb previous deficiencies

Leasing means you can better absorb previous deficiencies. Having a lower upfront cost and payment you’re better able to absorb a deficient  balance  on your trade-in and still fit the vehicle in your budget.

 

  1. Sales tax advantages

When leasing in Florida you pay less sales tax. You are charged on the payment only. With financing, you pay sales tax on the full value of the vehicle. That way, when you sell your financed vehicle privately after 3 years, you lose the tax difference. If you trade it in you recoup tax on the depreciated value of the vehicle. Regardless,  you would pay less sales tax up front when you lease so you would have the difference to put in an interest bearing account.

 

A caveat: the actual tax advantage to you of leasing, varies from state to state

 

  1. Shielding from the effect of an accident

Leasing means that should you have a major accident you pay your deductible only and repair it.  If the damage is significant, you can simply return the vehicle to the leasing  company at lease end and walk away. You are not affected in any way. Contrast this with a financed vehicle where you would take a big hit on the value.

 

  1. Most leases include gap insurance

Generally, leasing includes gap insurance at no extra cost. With  financing  you’ll need to find an additional $350 to $800. If you don’t buy it and your car gets written off early in the finance  period,  there  will  be  a  large  deficiency between what the insurance will pay and the amount you owe. You will have to make up the difference!

 

  1. Guaranteed term end value

You need not concern yourself over the future value of the car. Odd things can and do happen especially in these days of rapid technological advance.  These advances can have an extreme effect on the value of your vehicle. Imagine if technology were to somehow render the internal combustion engine obsolete!  With regular advances in Hydrogen, Solar and Hybrid Technologies this isn’t as far fetched as you might think. With a leased vehicle, you’re covered.  You simply return it to the  leasing company and say sorry  for your luck. Not so with a financed vehicle where you’re entirely at the mercy of the market!

 

  1. Lease depreciating assets. Buy appreciating assets

Top financial planners recommend that you buy things that appreciate  in  value and lease or rent items that decrease in value . . .  it’s a more intelligent use of your cash. Even the finest of automobiles depreciate in value.

 

  1. Benefit from the latest safety & technology

Leasing provides you with a brand new car every three years. This lets you benefit from the latest technology, particularly with safety advances.

 

  1. Potential financial advantages

Leasing attracts certain financial advantages. Lease payments, for example, can be written off on tax returns if you use the car for business. Also a  smaller financial obligation for balance and payment show on your credit report. This improves your debt  to income ratio and your credit score

 

  1. Benefit from manufacturer subsidization

Major automotive manufacturers love leasing. It helps them build brand loyalty and sell cars more frequently. This incentive is why you’ll often find many lease deals subsidized by the car/truck manufacturer.

 

  1. Build equity just as if you financed

Contrary  to  common  belief, you can build equity in a leased vehicle if you  keep it in nice condition and with reasonable miles. This is especially true of  brands in high demand because they hold their value well. Brands such as Honda and Toyota are good examples.

 

  1. Much greater flexibility

Leasing offers more flexibility. You can switch out of a vehicle after 3 years into whatever vehicle meets your needs at that time. This flexibility allows you to better accommodate changing needs.

 

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Admittedly, There are some people for whom leasing just doesn’t work:

 

  • Anyone who is extremely rough on their car
  • Those with bad or insufficient credit
  • Consumers with poor driving records (because the cost of insurance may be prohibitive)
  • Anyone without proof of income
  • Anyone with insufficient income
  • Someone who  wants  to  buy an inexpensive vehicle with cash in order to take a  break from payments altogether.
  • Anyone driving very high annual mileage. Extra miles can be built into a lease at a reduced rate, however there is no refund for unused miles.
  • Anyone who wants to keep their vehicle well beyond the financing term (longer than 5 or 6 years).

 

In my opinion, overall, leasing usually makes more sense than financing

for most of us. Consider your circumstances and you be the judge!



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