5 Times Where It’s Better To Lease a Car Than Buy It
Written by
John Csiszar
Edited by
Amen Oyiboke
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Unless you’re paying cash, the entire car-buying process can be difficult and confusing. This is particularly true when it comes to deciding whether you should lease or buy. Whereas buying a car means you own your vehicle at the end of your financing term, leasing is essentially a long-term rental contract with some important differences.
While only about 24% of new car buyers end up leasing their vehicles, according to Statista, there are some scenarios in which leasing could provide a clear advantage for you over buying with cash or financing. Here are some examples of when that might be true.
You Can Write Off Your Lease Payments
If you own a business, you can usually write off at least a portion of your car lease payments. This includes your down payment. You’ll have to document that you use your vehicle for business purposes. However, if you qualify, you can deduct everything from your monthly payment, including your maintenance and fuel costs, insurance, and title, licensing and registration fees.
The only caveat here is that if you also use your vehicle for personal purposes, you can only deduct the portion of your costs that apply to your business. For example, if you use your car 30% for business and spend $5,000 per year on vehicle expenses, you can only deduct $1,500 of your costs.
You Like Driving a New Car Every 2-3 Years
Most car leases run between two and three years. When your lease term is up, you simply drop off your car at the dealer and pay any excess charges you might have, such as if you go over the mileage limit. But at that point, you can roll right into another lease and start driving another brand new car. Although you’d always have a car payment, some buyers prefer getting a brand new vehicle every few years in exchange.
You Prefer Having a Car That’s Always Under Warranty and/or Free Maintenance
Basic car warranties typically last for three years or 36 months. This coincides with the typical lease duration. If you want to use a car that’s always under this warranty coverage, leasing can make sense. Although you’ll own a vehicle outright if you finance it to term, that contract might last five years, six years, or even longer. At that point, while you will no longer have car payments, you’ll be responsible for potentially expensive repairs. Leasing allows you to avoid that scenario entirely.
You Want a Lower Monthly Payment
Your monthly payment will generally be lower if you lease instead of finance — in some cases, dramatically so. If you take out a $30,000 car loan over 72 months, for example, your monthly payment will likely be in the $550 range. But if you lease the same vehicle, you may pay just $299, depending on the deals available on a particular car. That can amount to thousands of dollars per year in savings — although you won’t be building any equity.
You Want To Drive a Nicer Car
Although this may not be the best way to use the leasing process, since the monthly payments are lower, you may be able to “trade up” into a nicer, more expensive vehicle. For example, if your budget is $550 per month but the lease payment on the car you’re looking at is $350, you may be able to afford the “premium” or “limited” version of the vehicle instead of the “base” model. Whether or not spending as much on a lease as a finance payment might make sense is a decision that you should consider making in consultation with your financial advisor.
There’s a huge difference between leasing and buying a vehicle. While leasing offers smaller monthly payments, it typically comes with mileage limitations and penalties and end-of-lease wear-and-tear costs. You’ll also end up with no equity in the vehicle. But for some buyers, owning a new car every few years that’s always covered by a warranty — and may include free maintenance and tax deductions — tips the scale. Be sure to analyze both sides of the equation before you make your decision.
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