So, you have probably seen the commercials! Heard it on the radio, that you can lease the car of your dreams for less than $200 a month! WHAT? That is right, that is what the claims seem to be. Let us take this opportunity to share some insight into this type of car leasing opportunity. If you live within the 50 continental U.S. states, you might have some version of this deal available in your area, let’s take a second to analyze what this means for you.
Leases contracts are not standardized, they come in all different shapes and sizes like the cars they represent. Some leases will ask for money up front, some are based solely on your FICO score and your credit rating to even be accepted into such an agreement. Some leases offer you a small amount down and then your monthly payments are a tad bit higher than lets say a lease that has a larger money down at signing but for the most part depending on the percentage interest.
Let us further discuss what leases are and what they can mean for you:
You might be surprised to know that over half of the luxury cars in the U.S. are leased? What might be the advantage you may ask, well if you plan on changing vehicles often, then you will not take a hit on the depreciation as much because as long as you stay within the allotted mileage agreement stipulated in your lease you should be just fine.
The reason people lease varies, it could be that your stay in a city or office has a shelf life until you move somewhere else. Also leasing allows you to afford a much better car than you might otherwise be able to afford if you were to purchase it outright.
Leasing has two main benefits – Leased vehicles can allow you to have a newer/nicer vehicle and they are always under warranty. If your budget for buying a car outright is $20,000 cash, but you are able to lease a $50,000 car for about the same amount, you get your cake and are able to eat it to.
There is a clear divide between people who lease vs buy as there are of people who rent vs own. Each has its pros and cons, it really just depends on what you hope to attain and get out of your vehicle and wallet at the end of the day.
Leasing is not for everyone, it can be risky as well. You need to be good with math to ensure that you are not paying what the car is worth in the monthly payments and money down.
If you have a business or work for a business and you can write your vehicle off as a business expense, then leasing might be a good option. Almost all the expenses involved with leasing a car can be written off as a business expense if your business involves a lot of travel and driving.
The downside to leasing is the same as renting, once the lease is done you have paid money for the use of something and do not own it, you do not have any equity in the car, only the status it helped you attain. Since you do not own the car, when the lease is up unless you are very good at pinching your pennies you may find yourself in another lease and for some this perpetual cycle is a Godsend. Nothing to worry about really, every check up, is accounted for and it makes “having a car” a really pleasant.
The restrictions with leases come in the form of mileage caps. Usually between 12,000 – 15,000 miles a year. If you go over this amount you can be penalized which could turn out to be quite a lot depending on the terms of your lease.
In order to lease a car you must have some vague idea of what your financial future looks like. It is similar to paying a cell phone, you would not take out a cell phone, sign a two year contract without even having a job, would you?
Here are some basic comparisons to set your mind at ease when it comes to leasing that car you want.
The price between leasing and owning a car is usually the same. The biggest difference is how much money you have to put down for one or the other. In order to lease it is usually a few hundred dollars to a few thousand. When it comes to buying unless your credit is a 900 – you would have to consider getting at least 20% of the value of the car as a down payment.
Lease payments also tend to be less than outright car payments when purchasing. The reason for this is because most leases are 36 months and most car loans are about 60 months or more. Over time you pay more, but then again, over time you get to keep your rig.
When the lease agreement is up you would have invested about half of the money it takes to buy the same car depending on several factors such as base price and depreciation.
Now in 2015 you will see that there are great deals for leases in Houston. Take your time, take your calculator and get the deal that is best for you.