Buying a used car may be out of the question for people who are worried about reliability and having to own something that is second hand. Leasing may be a great option for someone who wants a new car but doesn't want to put up the large amount of cash to get it. Also if you are running a business, there may be some tax incentives to lease.
What are the benefits of leasing?
You get to drive a brand new car in its trouble free years
You will usually be covered by warranty which may also include oil changes
You can drive a more expensive vehicle for a low monthly payment and sometimes even for zero down
You won't have to worry about your cars resale value. Once term is up you just return the vehicle and move on.
If you own a business, the lease can become a tax deductible expense for your business. (seek accountant advice regarding this)
Downside of leasing?
At the end of the term you are left with nothing
If you are always leasing new vehicles your payments are never ending
Limited number of miles. If you go over, depending on the vehicle, it could cost you up to 50 cents a mile and no credit for unused miles.
If vehicle is in bad condition when you return it, you may be subject to charges
If you need to get out of a lease sooner you may be stuck with thousands of dollars in early termination fees
The vehicle cannot be customized. You must bring it back like you took it.
If you are concerned with purchasing a used car and know you will probably sell your vehicle after 3 years anyway, leasing may be a great option for you. At the end of the three year term you will be left with nothing but that money would be lost to a purchase of a new car anyway due to depreciation.Some manufacturers will even provide 0 down and 0% APR. When searching for a lease deal be very careful of the fine print. Many times monthly payments will look very attractive but the dealer will require a large amount of down payment. So just like when financing a vehicle, don't just look at the monthly payment. Take a look at all aspects of the deal such as down payment, APR, cost charged for extra mileage, term of the lease, if you need GAP insurance and if any insurance is available for excess wear and tear.