You’ve probably heard buying a car versus leasing one will save you money every time. And if you run the numbers, that might be true.
But over the last few years, almost one-third of all new car owners leased rather than bought.
If it isn’t about saving money, what are some of the reasons people chose to lease rather than buy when shopping for a new car?
While the percentage of people leasing is expected to level out or decrease slightly, the leasing market is projected to stay strong in the near future.
The profile of the consumer who leases has also changed over time.
Luxury cars made up the majority of leases for decades. Now we see more leases on small SUV’s, mainstream sedans, and even compact cars.
And millennials lease more than any other age group as a proportion of their overall sales.
What’s interesting is many car shoppers have no intention of leasing a car when they head to the dealership. But once they look at the new cars they want, leases begin looking like a much better deal.
In order to stick to a budget, a lease may be the only option that works if they have their heart set on driving a new car.
Best Reasons to Lease a Car
Let’s review some of the benefits of leasing a car and the reasons why people lease new vehicles going against the traditional advice that leasing isn’t a very smart financial decision.
Lower Monthly Payments
As much as people want to drive new cars, they often face severe sticker shock. Many soon realize buying their dream car is just that – a dream.
Sky-high monthly payments send car shoppers looking for lower-cost options. This means keeping their current vehicle, choosing a “lesser” new car, buying used, or leasing.
Leases are an attractive option because payments average over $100 less per month than finance payments on a new car purchase. This is because lease payments only cover the depreciation of the car rather than the whole cost of the vehicle.
Depending on the contract, lease payments also include interest, taxes, and fees.
If your budget can’t support buying your dream car and you aren’t willing to scale back or buy used, leasing may be a better option than purchasing and taking on a car payment you can’t afford.
Lower Down Payments
Most lease agreements still require a down payment of a few thousand dollars. Some dealers may waive the down payment depending on the chosen vehicle and the length of the contract.
Sales tax due on a lease is usually less than on a new car purchase too. Tax may only be calculated on your monthly payment and not on the total cost of the car.
Unfavorable Terms on Used-Car Loans
When a person plans to buy a used car, they need to remember lenders generally offer shorter terms and higher interest rates than they offer for new car purchases. This impacts monthly payments too.
Used car shoppers might look for, or be shown, brand new, under warranty cars which can be leased for much less than the payments on the used car.
This can shift their thinking toward leasing, even when they were sure a pre-owned vehicle is what they wanted.
Reduced Maintenance and Repair Costs
One of the biggest excuses people make for not buying used cars is the cost of maintenance and repairs.
Since a vehicle lease is usually for three years, it's always under warranty, so significant repairs and costly maintenance is generally avoided. Some lease agreements even include the performance of routine maintenance.
For women who feel females often get taken advantage of by repair shops, this is a significant benefit, and leasing often makes more sense than buying used.
Safety, Prestige, Pleasure
If you were considering buying a used car, leasing gives you some of the same benefits as buying new. But at a lower cost.
Your leased car will have the latest safety and technology features. Very important for keeping your family safe. And if driving a new car matters for your business or even for personal enjoyment, leasing makes more sense than buying used.
Are They Good Enough Reasons to Lease?
Should you buy or lease a car?
Only you can make that decision. But keep in mind many people will still tell you it’s better to buy; even if you think you've good reasons to lease.
Try to be objective when you make your decision and weigh all the pros and cons of leasing a vehicle.
Have you compared the costs of leasing and buying a car?
Edmunds.com can help you find a car and then try these lease vs. buy calculators from Bankrate and Cars.com. These tools allow you to enter all kinds of information and they’ll give you a good idea of what your payments will be if you buy or lease.
Whatever you do, remember you're taking on a monthly payment commitment.
You'll want to keep your inner-dreamer “in check” while deciding on a vehicle and whether new, used, or leasing makes the most sense to help you meet your financial goals.
Do you have a money question or comment? Submit them here, or drop it in the comment section below and we’ll find the answer!
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.