Financing a car sometimes poses a challenge to many people. The two options that dominate the car industry are either leasing a car or buying one. Many people work hard for down payments on expensive cars. However, buying a car is not always the best financial choice. Sometimes it makes sense to lease a car for many people under different circumstances. For example, a person who is traveling in a different country for a few months should consider leasing a car instead of buying one.
If you are trying to finance a car but are not sure if leasing is a good option for you, keep reading. This article will give details on when you should consider leasing a car.
Leasing a car vs. buying a car
Leasing a car and buying a car are two different processes in terms of financing. When you buy a car, all payments on your car loans lead to paying off the car and eventually it becomes yours. This process is similar to mortgage payments where a portion of the payment covers the principal and another covers the interest. By the end of the loan terms, the car becomes yours.
Leasing a car, on the other hand, means you are paying to use the car for a short period of time. The lease terms vary based on the kind of rental car you have. But the terms can be as high as 4 years. Short-term car leases such as six months or lower also exist. When the terms of your lease end, you will have a few options. You can either choose to lease the car again, buy it, or trade it for a newer model.
The following tips will help you determine if leasing a car is a viable option for you.
1. You need a car for a short time
Buying a car makes sense only if you are planning to keep the car for a very long time. If you are in situations where you do not intend to keep the car, the only viable option will be leasing a car. For example, if you are traveling to a bigger city or in a different country for six months, buying a car will not be a good financial choice.
Cars depreciate much faster and you might not have enough time to sell your car before you leave. Selling a car takes a long time. Some people travel to different countries, buy cars, and end up selling those cars for half the price because they are in a hurry. You don’t want to take on these responsibilities if you are not planning to own the car for a while.
2. When you are planning to trade the vehicle
There are people who choose to trade their cars so that they can own new models. Just like phone contracts, trading cars also work in a similar fashion. Instead of buying a new car every 2 years, for example, you can easily lease a car and trade it in for a newer model. You should avoid accumulating a lot of mileage on the car to avoid excess mileage fees.
3. It makes sense to lease a car if you are planning to upgrade
There are times when you might want a temporary car before you can purchase the car of your dream. This works for people who are planning to buy a specific model of car once it comes out. Or those who are saving money to buy a car in a particular range. In this case, it is a good idea to lease a car while building your saving to the range you want or before the one you desire comes out.
4. When your job requires it
It will make sense to lease a car when your job requires it. For example, if you are an Uber driver and don’t have enough cash to purchase a newer car, it will make sense to lease the car until you can afford your own. This is because many Uber clients give you good reviews and tips based on the quality of the card and the services you provided them. Without a good card, you could end up with bad reviews.
Some real estate agents or realtors also prefer leasing cars instead of buying them. Their job requires them to drive homebuyers to different houses for tours. In this case, it would make sense to lease a car than use your personal car. This will ensure the privacy of your own car information and keep your life separate from work.
5. When you have a meager income
Leasing a car is sometimes expensive depending on the model, the year, and the location. Buying a car, however, is more expensive, especially when you buy a new car. If you don’t have a good income to cover the cost of the car and don’t prefer getting a car loan, it will be a good idea to lease a car.
Since your income is not enough, leasing a car will protect you from further financial obligations. What you can do after leasing the car, is to lower your expenses and create a budget that allows you to save extra cash. After accumulating enough savings, you’ll then buy your own car.
Buying a starter car is always a good idea for people with low incomes. For example, if you have saved $5,000, it would make sense to buy a used car for $5,000 rather than use that balance as a down payment for a more expensive car. This trick will prevent you from getting car loans and give you a chance to save more money for things you need.
6. You don’t want to own a car at all
There is no such thing as one size fits them all. You don’t need to own a car simply because everyone around you owns a car. If leasing a car makes sense to you, then lease a car. It is all about what works for you given your current situation.
Best practice for using a leased car
After leasing a car, you will need to take great care of it. The car is not yours, and therefore, you must return it with similar conditions when you took it. The following are tips to help you use a leased car.
- Make sure the car is insured. Insurance is everything when it comes to driving. You need to have insurance for the car. Consider full coverage especially when you are leasing a newer model.
- Make sure the person you are leasing a car from owns the car. If you are driving a car that does not belong to the person you leased it from, you are really in trouble. When traveling abroad, always be careful about who you lease the car from.
- Record the mileage the car has before driving it
- Know how much gas is in the car. Most car places require that you bring the car with the same amount of gas the car had. If you don’t know the level of the gas, you might end up filling the entire tank.
- Know how long it will take you to keep the car. If you are planning to keep the car for a while, make sure you lease it for that amount. Otherwise, you will need to return the car and lease it again.
- Keep your mileage low to avoid excess mileage fees
- Do not damage the car. It is always a good practice to drive safely and avoid accidents especially when you are leasing a car.
