Benefits of Leasing

Car leasing can offer advantages and be an attractive alternative to buying, although it's not for everyone, as we'll discuss later. You must decide about the importance and priority of these benefits to you.

So, what are the potential advantages of leasing?

Lower Monthly Payments Because you only pay for the portion of the car or truck that you actually use, your monthly payments are 30%-60% lower than for a purchase loan for the same car and same term.

More Car, More Often

Since your monthly payments are lower, you get more car for the same money and drive a new vehicle every two to four years, depending on the term length of your leases.

Fewer Maintenance Headaches

Most people like to lease for a term that coincides with the length of the manufacturer's warranty coverage so that if something goes wrong with the car, the repairs are always covered.

Lower Upfront Cash Outlay

Most leases require little or no down payment, which makes getting into a new car more affordable and frees up your cash for other things. However, you can choose to make a down payment, or trade in your old vehicle, to lower your monthly payment amount.

Lower Tax Bite

In most states of the U.S. and in Canada, you don't pay sales tax on the entire value of a leased vehicle as you would if you purchased. You're only taxed on the portion of the value that you use during your lease. The tax is spread out and paid along with your monthly lease payment instead of being paid all at once.

No Used-Car Hassles

With leasing, the headaches of selling a used car are eliminated. When your lease ends, you simply turn it back to the leasing company and walk away, unless you decide to buy it or trade it.

Gap Coverage Included

Most leases automatically include free "gap" protection in case your vehicle is totaled in an accident or stolen, and you still owe more than the vehicle is worth. Loans do not generally come with gap protection.

Even with all of the above benefits, car leasing requires more personal discipline and commitment than buying. Therefore, you'll want to examine your motives and qualifications to determine if you are a good leasing candidate.