It may seem blasphemous to suggest this on a personal finance blog, but there are certain instances when leasing a car might make good financial sense. We all know the downsides to leasing — you ultimately pay more for the car than you would if you bought it outright, you are responsible for non-warranty repairs on something you don’t own, and time and distance limits can really take a bite out of your wallet at the end of the lease.
However, there are plenty of upsides to leases, otherwise 20% of new car transactions wouldn’t be leases. Here are some of the reasons why you might consider leasing rather than owning your vehicle:
Granted, most of the readers of finance blogs aren’t likely to care about showing off a new car every few years, but it might be worth your while to know you do not have to worry about expensive maintenance and repair issues. If you’re not mechanically inclined and don’t have a quality car mechanic on retainer, dealing with the realities of an aging car can be overwhelming. If you lease your cars and consistently choose reliable brands and models, you generally won’t have to worry about repairs or making the difficult decision of when to give up on an old car.
If you’ve never taken a hard look at lease agreements, the commercials may make it seem like you show up, sign some papers, and agree to a single price per month for five years. But for canny negotiators, there is definitely some wiggle room to save money.
There are three aspects to a lease that you will want to familiarize yourself with:
At the dealership, you will only be able to negotiate the purchase price of the vehicle, as the dealership only has control over that aspect, while the leasing companies control the other two cost factors. However, you can ask the dealer if they work with other leasing companies or banks that might be able to give you a better deal. Leaseguide.com offers a very concise explanation of how to negotiate your lease.
If you are self-employed or own your own business, leases could potentially be written off as a business expense. In addition, in most states you will only pay sales tax on the monthly payments, rather than on the entire price of the vehicle, saving you approximately half of the sales tax you would pay if you bought the car.
Though this is not always the case, generally you can expect no down payment or a very low one, plus lower monthly payments than you would have if you bought the car. Even if you have to put money down on the lease, it will be substantially lower than what you would pay to buy the car outright. The quality of the vehicle you receive access to with your funds is much higher with a lease — you would only be able to buy a beaten up used car with those funds otherwise.
As a generally frugal individual, I will probably never specifically recommend that someone get a lease rather than buy a car (with cash!). However, for individuals who aren’t mechanically inclined, who don’t drive a great deal, who are willing to negotiate, and who could benefit from tax breaks, a lease could be a good solution to your car needs.