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Why Leasing A Car Can Be Preferable To Buying One

Jul 13, 2008
The leasing of cars can get a bad rap in the press; this is mainly due to overcomplicated leasing procedures and a handful of unscrupulous operators who have ripped off customers in the past. At the moment it is estimated that around twenty percent of car transactions are now leases. This figure should continue to grow as buyers see the benefits of leasing over ownership.

Some believe that buying a car will in fact work out cheaper than leasing one. While this may be true if you can pay of the repayments quickly, if it will take a long time to pay the car off or if you sell the car before the finance is completed it is almost certain that you will lose money. Leasing however works along a different method, for paying the same sort of monthly fees you can lease a car over an extended period of time and then trade it in for a nominal fee, while you will never actually own the car, the eventual cost of having the car will be less than if you actually bought it.

While it is hard to extract a great deal when buying a new car, leasing works along different lines. You can haggle over the capitalised cost; that is, the vehicle price. You can also negotiate the monthly payments so they are more affordable; unlike buying a car, a lower monthly fee does not mean you will be paying for the car for longer; although trade in penalties may be incurred. You should also negotiate the residual value; this is the value of the vehicle at the end of the lease period and should definitely be negotiated with the dealer.

Most people believe that only businesses will be able to gain tax breaks for leasing cars. While it is true that businesses can receive breaks for monthly expenses it is worth investigating whether as an individual you can receive similar breaks. As always it is worth asking your accountant to take a closer look at the financial situation when you begin the leasing process.

A widely held belief about car leasing is that you will have to pay a rather large sum when you eventually turn the car back in. The figure is usually dependent upon the annual mileage of the vehicle. Most leasers will give an annual mileage allowance of 10,000 miles but it is possible to negotiate this if you expect to do more. It is definitely advisable to increase your allowance as penalties can be encountered if you go over your allowed mileage. These can be as much as twenty percent per mile so negotiation is your best course of action. However, if you buy a car a high mileage will also lead to a loss in value so the financial penalties can be seen as comparable.

Once you reach the end of your leasing period you do not even have to return the car. Many companies will give the option of buying the car after the lease is up. There are a variety of benefits to following this course of action. The buy out price can make the car a great deal and you will already be comfortable with the car and have the knowledge of its mechanical history. In addition, if you have exceeded the mileage or the car is excessively worn, you can avoid the fees by buying the vehicle.

Car leasing definitely has benefits over buying cars. The car is the one thing we buy in life that is certain to fall in value as soon as it is driven away from the showroom. After all, you will most likely be paying monthly for a new car anyway; by leasing you have the option to change your car regularly whilst avoiding the financial downsides of depreciation.
About the Author
Motoring expert Thomas Pretty looks into the benefits of car leasing .
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