One of the best automotive debates focuses on whether you should buy or lease a vehicle. No, the debate is not strong enough to merit a ballroom brawl, but it does bring a little emotion out of people. Some consumers prefer to outright own a vehicle, while other consumers like to lease vehicles for a number of reasons. This brings us to an important point.
Leasing is not for everybody.
However, why leasing a car is a good idea presents several compelling reasons.
More for Your Money
An automobile lease factors in something car buyers cannot enjoy: depreciation. Leasing a vehicle means you pay only the depreciated value, not the entire price of a vehicle. If you sign a lease to drive a car worth 25 grand for two years and the value of the vehicle after two years is $16,000, then you make lease payments on the $9,000 depreciation difference. If you purchased the same vehicle your monthly payments cover the whole $25,000.
Not Much for a Down Payment
Car dealership finance departments love to see substantial down payments for several reasons. A large down payment lowers monthly loan payments, which increases the likelihood of loan approval. Large down payments also provide auto dealerships with more cash to purchase vehicles up for sale during auctions. When you do not have much money to make a considerable down payment, you might be better off leasing a similar vehicle. Most leases require little, if any down payments.
New Car Every Few Years
How would you like to drive a new car every couple of years? You can accomplish the goal by leasing a new vehicle. If you take out a six-year loan on a new car, you have to find a buyer to get out of ownership before the end of six years. With a short term lease of let’s say two years, you drive off a dealer lot with a new car every 24 months. With a growing number of consumers taking out six and seven year car loans to spread out monthly payments, it makes sense to switch over to leasing the same vehicle.
No Maintenance or Repairs
When you purchase a new car, van, truck, or SUV, you assume responsibility for repair and maintenance costs. As the years pass, the costs for repairs and maintenance begin to climb. Car leases include factory warranty coverage that eliminates the financial hassle of handing over cash to fix a broken window or replace a transmission. Some automakers such as BMW even take care of minor maintenance issues like oil changes and tire rotations. With a car lease, your only out of pocket expense involves paying for fuel.
Generous Tax Breaks
Leasing a vehicle makes sense for entrepreneurs and small business owners. You can write off a percentage of the cost of leasing a car as a business expense. From using a pickup truck for hauling timber to driving around town meeting clients, the IRS tax code permits tax deductions for car leases. We recommend entrepreneurs and small business owners consult with a certified tax accountant to verify eligibility, as well as how much you can deduct each year. Even if you work for a company or corporation, you might qualify for tax deductions that cover work related vehicle trips.
Without having to pay off an auto loan, you have the opportunity upgrade your current vehicle into a more upscale model. The sticker price on a 2018 Taurus is $27,595. If you take out a 48-month loan and put down $3,000, your monthly loan payment will be about $512. With zero money down, you can upgrade to a 2018 Mustang GT Fastback for 36 months at $489 per month. You not only pay less per month when you lease the Mustang, you also have the option to drive another make and model after just three years.
Leasing is also a good idea for professionals who spend significant time traveling on business trips. Not only do you enjoy tax deductions, you also are not on the hook for depreciation costs. Car owners who use their vehicles to take business trips enjoy tax deductions, but depreciation costs typically nullify any tax savings.