Last Updated on Saturday, October 17, 2020 by ProsCons
Driving the personal car is a dream of many among us. Meanwhile, buying a car is not an easy task because of its heavy costs. Alternatively, people are going for car leasing; it enables you to drive your own car and at a low price. However, car leasing may not be as cheesy as it sounds. In this article, we are going in depth to understand the pros and cons of car leasing and provide a final verdict on it.
Pros of Car Leasing
Owning a car, either in full-payment or down-payment, incurs a heavy cost. On the other hand, payment for a car lease is comparatively lower. The payment system is similar to paying rent to lease an apartment. The amount of lease payment is calculated based on the depreciation of the car over the lease period instead of full-value of the car. Hence, the required amount for car leasing is cheaper than the installment amount while buying it on loan. Therefore, the good aspect of car leasing is that you can afford to drive nicer and better cars even if you cannot purchase it.
You can check the car leasing calculation here to find the estimated cost for your drive.
New car everyday
It is a simple rule. You get a new car every time you lease it. If you are up to swapping among new models of car, car leasing is your best choice. You can enjoy a sweet and comfortable ride that a new car promise. Moreover, you can always boost your social impression with the new car.
Low maintenance costs
Unfortunately, cars do get old. They need care and maintenance in the long run. One of the benefits of car leasing is that you don’t need to take care of old cars. Instead, you will enjoy a healthy fresh car with minimum maintenance cost. Moreover, majority hardware costs are likely to be covered by warranty. Hence, it is a win-win situation for car leasing.
Renew or Buy option
In general, the car leasing contract has the option to renew or buy the car at the end of the contract time period. You can choose among owning the car by paying the necessary cost or renew the lease contract to enjoy the car further or return the car and take a new car instead. This flexibility can come handy based on your plan and financial situation.
One of the advantages of car leasing comes in the form of tax benefit. Lease payment is treated as expenses and is tax-deductible. It means if you own a business, you can show lease payment as business expenses and enjoy tax reduction.
Cons of car leasing
If you are renting a thing, it’s not truly yours. The drawback of car leasing is that you never own it. In other words, leasing a car means you need to hand it back at the end of the agreed time period. Despite paying lease amounts on time, you are entitled with nothing. Moreover, the return of the car should be done in agreed condition. You cannot modify any parts because the car is not yours. Any tear and wear or damage to the car will cost you extra money.
Limited time and mileage
Often, the terms of agreement include the fixed time period and mileage per year. You are liable to return the car back at the end of period. Moreover, you should keep your mileage in check and avoid overrunning. In some cases, the car dealers/owners might set a distance cap for the travelling. This can be really frustrating if you are planning a big holiday for your family and you are running out of mileage or distance.
Liability for payment
Car leasing contracts are strict in terms of lease payment. Once you sign for car leasing, you are liable to pay the lease amount till the end of agreement. Whether you lose a job or go bankrupt, you still cannot avoid the payment. Moreover, the amount of payment remains constant throughout the agreed period. Even if the car is destroyed in an accident, you will still be paying the lease amount. Although insurance shall cover the loss of destroyed cars, lease payment is still your liability.
Fees and penalties
One of the disadvantages of car leasing is its restrictive contract. The contract generally includes extra charges for any damages beyond the agreement and penalties for late submission of payments. You should pay separately for acquisition fee and disposition fee, based on the contract. At the end, you might end up paying higher money than you would while financing the car, if you are not careful enough.
Sound Credit Background
Car dealers thoroughly check your credit history and financial status before lending you a car. Make sure you have a sound credit background. Otherwise, you may never get a car. A stable financial source means you can afford to pay for car leasing. Until and unless you can guarantee the payment, you are less likely to get a car.
The ultimate question is should we lease a car or not. It depends on your lifestyle and your personality. If you are in your early period of earning and most probably living without family and children, car leasing can be a good choice to fulfil your dream of driving. On the other hand, if you have a stable income source and are carrying a family with kids, you might probably want to own a car. Car leasing is a good option if you own a business because you can defer your expenses to the business and reduce your tax payment. However, you should be able to form a clear picture of the future and make strong financial plans, if you are going for car leasing.
Overall, car leasing is a risky proposition and you should weigh both pros and cons of car leasing before making a final call.