People who don't want to spend several years paying off a car loan can benefit from the cost savings associated with leasing a vehicle. Consumers who lease their cars can save money on auto maintenance and repairs and make lower monthly payments than they would if they purchased a vehicle.
Costs
According to the Edmunds auto information website, prices for new cars have risen faster than most people's incomes. As a result, it's taking some consumers as long as six years to pay off their car loans, which can make leasing a vehicle more appealing to some people. Consumers who lease cars also gain the advantage of making low monthly payments. Lease payments are usually less than loan payments because the lessor only pays for a car's depreciation during the lease term instead of financing the vehicle's total purchase price.
Value and Maintenance
Leasing is especially appealing to people who prefer to drive newer cars because they can turn in a vehicle and lease another one about every three years. Lessors also don't have to be concerned about resale values, since they don't have to sell their cars to get money to buy another one. Leased cars also have low maintenance costs if consumers keep them for three years. Edmunds notes a lessor may only need to pay for oil changes and a brake job during that time period. Other repairs would usually be covered under the car's warranty.
Mileage
People who don't drive a lot can benefit from the lower costs associated with leasing a car. According to Consumer Reports, lease terms usually limit the number of miles the lessor can drive each year to 12,000 or 15,000 miles. That may be sufficient mileage for people who don't drive to work every week or take long road trips. Lessors can ask for higher mileage limits, but that will cost extra. According to Edmunds, lease terms can include charges of 15 to 30 cents per mile for each mile that a lessor exceeds a mileage limit.
Considerations
People who use their cars for business purposes may be able to claim a bigger tax deduction if they lease their vehicles. A "Smart Money" magazine article titled "To Buy or to Lease" says taxpayers can deduct depreciation along with implicit financing costs for leased vehicles when they're used for business purposes. Interest charges paid on loans to buy cars aren't deductible even if the cars are used for business. Ensure that any lease you're considering includes gap insurance coverage. Gap insurance pays the difference between the cash value of your leased car and the balance on your lease if your vehicle is stolen or totaled in a collision. Gap insurance covers lessors if their auto policies don't pay for all expenses associated with thefts or severe collisions.
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