Leasing an automobile carries may distinct advantages over a traditional auto loan. Many consumers buy into the myth of a lease agreement with hidden fees that will devour any savings and leave drivers owing thousands of dollars at the end of lease terms. Responsible use of leased vehicles leads to savings and the ability to continually switch vehicles.
Leasing is Cheaper
Leasing a car allows for a short-term commitment to a vehicle at a lower price than taking out an auto loan. With a lease, you're only paying a portion of what the vehicle is worth as opposed to an auto loan where you must pay the entire sale price of the car, plus interest on your loan, to own the vehicle free and clear. For example, leasing a $20,000 automobile over a 24-month period may cause the vehicle to depreciate to $13,000 at the time of your lease end. Your lease agreement makes you responsible for only the $7,000 difference in vehicle value over the life of your lease.
More Buying Flexibility
Two to three years is a common length for auto leases around the country. The short-term commitment allows you to enjoy a vehicle while the car is at peak performance and hand the vehicle back to the dealership before any problems begin to arise. This also allows you more buying flexibility since you always have something new to drive. If you get bored with your car easily, leasing is the ideal option to keep your wheels fresh and entertaining.
Lease Tax Benefits
If you lease your car for business purposes, the IRS allows you to deduct your monthly lease payments from your federal tax return at the end of the year. Even if you don't use your vehicle for a business, most states still afford you a tax break because you only pay taxes on your monthly lease payments and not the total sale price of the vehicle. According to Lease Guide's website, if you live in states like Illinois and Texas you must pay sales tax on the full value of the leased vehicle.
Option to Purchase
The dealership leasing you the vehicle will probably offer you the opportunity to purchase your leased vehicle at the end of your agreement. This allows you to buy the car for its depreciated value absent any dealer markup. Your history of regular lease payments with the dealership also works in your favor because it can help you secure a low interest rate on your financing, which can save you even more money.
Getting Out Early
Once you sign your name on an auto loan, there's really no way out. This may not be the case with an auto lease agreement. You can get out of a lease agreement early by paying a fee and signing the lease agreement over to another credit-worthy driver. Several websites, including Lease Trader and Swap a Lease, exist solely to match parties who are looking to sign over and assume auto lease agreements.
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