Leasing Cars: Pros & Cons

Determining whether or not to lease a car is a matter of personal choice, although some business elements should be considered as well. While leasing a car means that you might pay less in income taxes at the end of the year, buying the car gives you an actual asset when you purchase the vehicle.

Commitment

If you're the kind of person who likes to drive a new car every three or four years, leasing will have some advantages. You'll be able to turn the car in at the end of the lease without having to go through the hassle of trying to sell it. At the end of the lease period, some lease options will let you buy the car if you desire.

Payments

In some cases, leasing the car is going to save you on monthly payments. Since leasing payments tend to be lower than monthly car payments when you're buying the car, you might be able to get behind the wheel of a car that might be out of your usual price range. Another cost factor, especially if the car is going to be used for business purposes, is the tax savings found on your income taxes since all or part of the monthly lease payment is considered tax deductible. When you pay your monthly lease payment, that money will go to the leasing company. At the end of three years of making payments, you'll have nothing to show for your money, which can be a disadvantage when you compare that to making three years of car payments.

Reliability

Many leased cars tend to be new, which means you'll be less likely to have the car break down on you. Another advantage is that most leased cars have a specific mileage limit in place, your leased car will be a fairly reliable vehicle. The disadvantage, however, is that you won't own the car unless you buy it. Should your financial situation change, you might find early termination clauses in the lease.

Credit

Less than perfect credit can be a disadvantage when leasing a car. In many cases, the leasing company requires the person leasing the car to have good to excellent credit. If the person doesn't have the right kind of credit, the leasing company can charge a higher interest rate. This can lead to leasing costing more per month than simply buying the car.