Advantages of Leasing
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Is Leasing Right for Me?
As with anything in life, there are a long list of pros and
cons with automotive leasing that should be fully understood and
carefully considered before you sign on the dotted line. Here
are a few of the most important ones.
Lower Payments
With a lease your monthly payments will almost always be
lower than a conventional loan because you are paying for only a
portion of the car's full value over the lease period. This
gives you the option of driving a nicer car for the same monthly
cost.
Manufacturer Incentives
In tough times manufacturers may offer very attractive terms
such as below market interest rates and artificially high
residuals that both have the effect of lowering the monthly
payment.
Lower Up-front Costs
Unless you decide to make a large cap reduction payment,
initial costs for most leases will be limited to a refundable
security deposit (typically one monthly payment rounded up to
the nearest $25), sales tax depending on your state, title and
registration fees, environmental fees (i.e., battery and tire
disposal fees), and finally, your first monthly payment. As a
result, leasing ties up less of your capital, freeing cash up
for more lucrative investments.
Taxes
With the tax reform act of 1989 phasing out deductions for
interest on car loans, leasing may now compare more favorably
against conventional financing from a tax standpoint. Although
most individuals will not save taxes with a lease, some
businesses may enjoy certain advantages with leasing. Consult
your tax advisor for more information.
Hassle-free Disposition
At the end of the lease you simply turn the car back in to
the dealer and walk away. You won't have the effort and expense
of selling the car or haggling over its trade-in value. If you
decide to buy the car at the end of the lease you know about how
much it will cost (no more than the residual value).
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