J. Paul Getty famously said, "If it appreciates, buy it. If it depreciates, lease it." When it comes to automobiles, this may be good advice for many folks.
After several years of decline, more folks are leasing their cars. So what driving the increase in leasing these days? First, interest rates factored into lease payments are low. High gas prices are also crimping driver's cash flow and leasing provides an alternative that over the short term provides a lower monthly payment. Also, since leasing took a dive a few years ago, the supply of used cars coming off lease is tight, which means used cars are more expensive. So leasing might be a better option until used car supplies increase in a few years.
There are several advantages to leasing, making this option more attractive to many drivers, some of which are:
Less cash upfront: Most leases require a small or no down payment. This makes getting into a new car more attainable for cash-strapped buyers or frees up your cash for other things.
Lower monthly payments: Because you're only paying for the portion of the vehicle that you actually use, your monthly payments can be more than 30 percent lower than the payments for a typical loan you would need to buy the same vehicle.
More car, more often: Since your monthly payments are lower, you'll be able to get more car for your monthly payment and drive a new car every two to four years, depending on the length of your lease.
Lower sales tax: In many states, you only pay sales tax on your monthly lease payments, instead of on the entire value of the vehicle.
Lower maintenance cost: Many people lease for a term that coincides with the length of the manufacturer's warranty. This ensures the vehicle is always covered under the warranty.
Also, with leasing, the headaches of selling a used car are eliminated. When your lease ends, you simply return it to the leasing company and walk away - or you can buy it from them.
Driving a good lease deal
Leasing is very similar to taking out a loan to buy a vehicle, but there are two important differences: First, the dealer sells the car to a leasing company and second, you must return the car at the end of the lease term. While the concept of leasing is fairly simple, many folks don't understand it well enough to negotiate the best deal. The key to getting a good deal on a lease is to know how an auto lease works. Check back in a few days and I'll give my advice on negotiating a good lease deal.