How Does Leasing A Car Improve Your Financial Position?

Written by: Michael Thomas

Leasing a car is one of the smartest things that you can do when you want to improve your financial position and avoid paying for rampant depreciation on your vehicle. There are a few steps listed below that will make this process much easier for you, and you will find that you can completely change the way that you handle your car purchases going forward.

1. Why Buy A Car?

People buy a car because they want to keep it for a very long time, have the chance to sell it, and own it outright. There is a bit of status issue around owning your own car, and there is even more of a cultural ideal around owning a car that is paid off. This is normal because people learned these attitudes from their parents. However, it would be wise to consider what happens when you buy a car:

  • Unless you have bought a classic car, it will not appreciate. Almost all vehicles will depreciate in value over time. They will lose their value whether you want them to or not. By the time you are done paying for the loan and interest, your car is worth less than half what you paid.
  • The car requires a lot of maintenance that a dealership does not handle for you. This means that you are stuck paying for all repairs on the car,
  • The car could have recall issues or major problems that are outside your control. You still own this car, and it is not very easy to trade in because you have a loan that you need to pay off on the car.
  • The loan on your car might not get covered if you total it in an accident. You have to buy special insurance that will pay for the rest of the loan, and this costs even more money than you already spent.

2. Why Leasing Is Cheaper

When you lease a car you are agreeing to do three things:

  • You will make a down payment on the car at the time the lease is signed.
  • You will make a monthly payment that is generally lower than what you would have paid for a loan
  • You enter into a service contact on the vehicle

The lease on your vehicle means that you are driving a car the dealership still owns. You are making regular payments, and you will give the car back in two to three years. This is a much cheaper option because you can maintain a similar payment, but you will go back to give your car to the dealership. The dealership sells that car as gently used, and they can lease you another car.

You are never stuck tryin to sell the car, and you did not pay as much for the depreciation period on the car. You are going to move on to a very nice car that will be about the price you paid for your last car. You are constantly trading in your car without worrying about the car breaking down, and you do not need to spend a lot of extra money maintaining the car. Most of the milestone services that you need to do will not be reached until after you give the car back. Everything else that needs to be done is usually handled by the dealership.

3. Leasing Ends Up Costing Less Money

You need to compare two very important things when you are leasing a car. The car that you are leasing requires that you give the dealership a down payment. You will make payment on the car until you give it back, but you are not paying for interest. You will pay more in interest if you buy the car, and that interest will exceed the cost of the down payment in the first year in most cases.

You also need to look at how cars are changing. You need to be sure that you have thought about how new cars will look in two to three years. You could have spent a lot of money on a new car, but that car could be outdated a couple years after you bought it. You still have four to five years left on your loan, and you cannot go out and get a car that you really want.

When the technology changes, you will go back with your leased vehicle, turn it in, and lease a new car that has all the new tech you wanted. This is the best way to stay in a car that is fun to drive, and you never need to worry about how your car will start to lag behind the competition. This is something that many people do not consider until they are not sure what their actual options are.

When you have concerns about how to manage your lease, you need to look at the kind of car you want to be driving. Some people want to keep the same car for a long time. However, most people will prefer to move into a new car every couple years because that allows them to drive something that is fun, that is not outdated, and that does not continually cost them too much in interest every month.

4. Who Benefits From Leasing?

All customers benefit from leasing. The sort of car you lease does not matter because you will spend a lot less money on that lease than you would buying the car. However, you also need to remember that most people who are leasing have thought about it ahead of time. Make sure you have your down payment ready so that you can get started.

There is also a certain type of driver who benefits from leasing when they want to drive a really nice car or sports car. You do not want to spend over $100,000 on a car only to watch it depreciate just after you have bought it. The more expensive the car gets, the worse the depreciation will get.

If you look at your favorite film and TV stars, they often lease their cars because they can move on to a new one fairly quickly. It does not pay to own a really nice car unless you own a classic car. Those cars will rise in value over time, and they will pay the owner back for their dedication to the vehicle. A regular car that is not going to turn into a classic is not worth the money when you could just lease the car for a couple years.

5. Conclusion

There are many people who never thought of leasing a car because they did not realize how efficient the process could be for them. You can literally change your financial future by leasing a car because you can stay in a new car most of the time, get a lot of service and repairs paid for, and move on to a new vehicle every few years that looks fantastic. You will make a good impression on everyone at the office, and you will not spend exorbitant amounts of money on interest every year.


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