Why Car Leasing Beats Car Financing

It is true: car leasing beats car financing. Okay, this statement is based on my opinion and is derived, in part, on my one and only experience leasing a car. And I will say this: car leasing is certainly not for everyone, particularly if you plan to leave the country, or your car needs are likely to change before the lease expires, or drive a lot of miles each year.

Other than that, car leasing offers advantages over car financing and that includes cars leased through American Honda Finance, Toyota Financial Services, Ally Financial or other companies. This also includes deals on used car leases from services such as LeaseTrader.com where you can assume an existing lease. Under the latter arrangement, LeaseTrader acts as intermediary between the lessee and you; you’ll be making your payments to the finance company once the lease transfer has been completed.

Car leasing beats car financing for the following reasons:

You can get afford a better car — You may have your eyes set on a Nissan Maxima, but you’d prefer the Infiniti G sedan. Finance this deal and the Maxima is within your budget, but the Infiniti is not. With leasing, your monthly Infiniti payments may be lower than you monthly Nissan auto financing payments as leasing companies consider what your “G” will be worth at end of lease. Some luxury cars hold up value quite well, offering favorable residuals which mean you’ll pay less each month.

You can get a new car every two or three years — Americans are holding onto their cars longer with AutoPacific reporting in 2009, that 59 percent of new car owners planning to keep their cars four years or longer. [1] That doesn’t mean you have to or want to. With leasing, you’re assured that you’ll get a new model with the latest technology instead of having to deal with an old car that will soon face major repairs.

You avoid major repairs — With car leasing, you avoid major repairs. If a repair is needed, you’ll be covered by your car’s warranty. Drive a car for 12,000 miles a year for five years or longer and by the fourth year you’ll be replacing tires, by the fifth year the water pump and by the sixth year you’ll face potentially more expensive repairs especially if your car is no longer under warranty.

You may be able to enjoy a tax break — Car leasing, especially for businesses, is an attractive option. You get a tax break, but even private parties get a break too. Mark Solheim, writing for Kiplinger’s Personal Finance says that in “…most states, you pay sales tax only on the monthly payments, not the sale price of the vehicle.” [2] For example, if your payments are $300 a month and your lease term is 36 months, then you pay sales tax only on the $10,600, not the full price of the vehicle.

Of course, if for some reason you cannot keep your vehicle for the entire lease term, you can always try to find someone to take over payments by using LeaseTrader.com or Swapalease.com to expedite a transfer.

References

[1] Autoweek; Americans Plan to Keep Their Cars Longer, AutoPacific Study Finds; Greg Migliore; July 14, 2009

[2] Kiplinger; Five Myths on Leasing a Car; Mark Solheim; February 2008

Resources

SayLending.com: Auto Leasing

Auto Trends Magazine: How to Save Thousands on Your New Car

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