When Does Leasing Beat Auto Loan Financing? |
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By: Mary Wise Posted: 2007-08-06 17:31:01 |
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Whether leasing is advantageous or not will depend on your particular financial situation, on your needs as a driver, as a tax payer and eventually as an owner. By leasing a car you agree to a series of terms that you should be well aware of before even considering undertaking a leasing contract. This is due to the fact that leasing is only advisable under the right circumstances. Otherwise, compared to auto loans leasing is far more expensive on the long run. Thus, you'd better analyze your situation carefully prior to deciding what to do.Car Leasing Explained When you lease, the financial institution is the proprietor of the vehicle and remains proprietor of the vehicle till the car is finally purchased. During the leasing contract you get to drive the vehicle and use it with some restrictions (according to the leasing contract). The limitations are similar to those imposed for the ones that rent vehicles and basically depend on the financial institution stipulations (for instance, there are usually certain mileage-per-month ratios).In exchange for using the vehicle, the applicant has to pay a monthly installment that is normally just a bit higher than a rent payment. Eventually, the lease taker is entitled to purchase the vehicle and in that case, the monthly payments are considered as part of the payment. Thus, the applicant has only to make a lump payment at the end of the leasing term to keep the vehicle or else, he returns the car, renews the contract or exchanges the car for another vehicle.Benefits of Leasing Over Auto Loans Leasing provides several benefits that makes this financial transaction more advantageous than purchasing a car with an auto loan under the right circumstances. For instance, the payments' amount is significantly lower than the loan installments and only a bit higher than renting.Moreover, since the car remains property of the financial institution, there are tax benefits too. Part of the payments of your leasing contract can be deducted from your tax presentations. And last, but not means least, getting approved for leasing is far simpler than qualifying for a car loan. There are not harsh credit requirements for approval. You'll only need to show proof of your ability to afford the monthly payments of the leasing contract.The Right Time For a Leasing Contract When is leasing advantageous? There is no single answer to this question. If you lack certainty in your financial life, if you don't know what you are going to earn then next semester or year, you won't commit to a loan for purchasing a car that you might lose due to your lack of ability to repay the loan. Leasing provides more affordable payments and you can start saving as much as you can for the final lump payment if you want to keep the car.Also, if you are one of those that changes the car regularly, leasing might be the right solution since you don't need to keep the car, and by the end of the leasing contract you can renew it and request a newer model.
---- Mary Wise, a professional consultant at Badcreditloanservices.com with twenty years in the financial field, prevents consumers from falling into the hands of fraudulent lenders. In her website you will find more useful tips and interesting financial articles on this and many other related topics. |
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