I Need to Change my Car, Should I Lease or take a Loan?
       By: Sarah Dinkins
Posted: 2006-10-11 23:02:53
Leasing a CarLeasing a car is like renting a vehicle: you pay a monthly installment which includes a fee for the use of the vehicle, and some other fees and costs, like insurance, maintenance, administrative fees, etc. However after a period of time leasing, you are entitled to exercise the right to purchase the vehicle for a considerably smaller amount than the retail price of the car. If you decide to do so, then the monthly payments you’ve made can be considered to be part of the purchase price of the car and you only have to put enough money down to complete payment.Benefits of LeasingLeasing is an excellent option for those who like changing their car every two or three years because you don’t need to sell the vehicle, you just have to notify the financial institution you don’t want to pursue with the leasing for another period and return the car. You can even arrange for the car to be exchanged for a new model or another brand and model and start paying the leasing installments for this new car.Since the car remains property of the financial institution, it doesn’t belong with your assets and you won’t have to pay taxes over it. Moreover, in some cases it can be deducted from taxes as an expense. This is very much like renting a car, however, it’s considerably cheaper as the leasing installments are but a portion of a car rent installment.Drawbacks of LeasingFor those who like ownership, leasing won’t satisfy their needs. As stated before, the car leased remains property of the leasing company, and thus you cannot do what you please with it. It cannot be repainted, fixed, have the interiors changed, etc. without the authorization of the leasing company. It cannot be sold or rented and you can’t decide which insurance company to hire or which mechanic can repair it.There are also some limitations as to the mileage you can drive with the car. If exceeded there are penalty fees. Also, since the leasing period is limited, unless you exercise the right to purchase the vehicle, you’ll have to return it in the same conditions that it was given to you. Any reparations that have to be done to the car will be your responsibility unless the insurance covers them.
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