Leasing is back! Benefits of Leasing a New Car

Cincinnati Chevrolet Lease Advantages

What if I told you that you only had to pay for less than half of a brand new vehicle? What if I told you that you could have monthly car payments 30%-60% less than if you purchased a brand new car. Now, what if I told you that you would have to lease a new vehicle to receive those 2 unbelievable benefits?

Well…Leasing is back and it is stronger than ever and it is the best way and most cost effective way to acquire a new vehicle. There are no ifs, and  or buts about it.  Many people think leasing is a bad option because they have heard from people that leasing can be costly in many ways. They may argue that they drive a lot of miles, or they have been penalized at the end of a lease for excess wear, tear, or damage done to the vehicle, or people may think leasing is not the way to go because you never own the car.  I, however, may argue that if you drive a lot of miles then leasing is definitely the best option for you.

Lets say you drive a lot of miles…..for example 30,000 miles per year and you are buying a $25,000 car and 3 years down the road you decide you want to trade that car in. Well with 90,000 miles and a 3 year old car the value of that vehicle has probably on average depreciated to about $7000 trade in value…..about 25% of its original value when it was new.  Now if a Financial Adviser told you that you could invest in something and lose 75% of what you put in it over the first 3 years you would think he is the craziest person on Earth. It is 100% inevitable that a car is going to depreciate but when you drive a lot of miles your are rapidly speeding up the depreciation cycle. Leasing takes the depreciation aspect out of the picture for the consumer.

A wise man once said…..You should own what appreciates and you should rent (lease) what depreciates! Now how much better would it be to put 90,000 miles on a vehicle in 3 years and just turn it back in and not have to worry about the depreciation? Another argument against leasing a car is that you never own it….you put all this money towards the car for 2-3 years and then turn it back in and you don’t own anything. I have 2 comebacks to that argument: For one, the majority of people who buy a car come back to trade in their car before it is ever paid off so in essence they rented that car for that period of time. And two, if you bought a car and financed it for 72 months and when you pay that car off (keep in mind you have now paid 100% of that vehicle) and lets say you have put the national average of 15,000 miles/yr on that vehicle it would now be 6 years old and have 90,000 miles on it. In most cases a 6 year old car with 90,000 miles has depreciated about 80% of its original value. So over 6 years your car has depreciated 80% PLUS the maintenance and service that is done to a car once it starts hitting 50,000 miles and up will start adding up the service bills (see Benefit #3 below).

I truly believe in leasing! As a New Car Sales Manager at McCluskey Chevrolet, I truly believe in leasing. My wife and I have leased 4 vehicles, my family leases, my friends lease, the CEO and President of McCluskey Chevrolet leases, the majority of the salespeople lease their vehicles, doctors, lawyers, accountants, CEOs and Presidents of companies lease……….Why?

Here is WHY:

1. Lower Monthly Payments- Leasing is based on a Guaranteed Future Value or Residual (what that vehicle will be worth at the end of the lease), you only pay for the portion of the vehicle that you actually use. The average lease residual today is 50% PLUS there are Rebates from the Manufacturer (also called Cap Cost Reduction) up to $3750 to entice consumers to lease. So in essence, on average you are only paying on 40%-45% of that vehicle over your 24-39 month lease.  Monthly lease payments are 30%-60% lower than a purchase loan for the same car and same term.

2. New Car, More Car, More Often- Most leases have a term of 24-48 months. What that means is that since your payments are lower, you get more car for the same money and you get to drive a new vehicle every 2-4 years.

3.  Fewer Maintenance Problems- Lease terms today coincide with the length of the manufacturer’s warranty coverage. So, if something goes wrong with your leased vehicle, it will be covered under warranty.

4. No Trade-In/Used Car Hassles- With leasing, the headaches of trading in or selling a used car are totally eliminated. One of the greatest benefits of leasing is that at the end of your lease term, you have 3 options:  1. Turn the car back in to the dealership and pick out another brand new car! 2. Buy your lease for the residual value. 3. Trade it in….If the used car market is rocking and your leased vehicle is worth more than what your residual value is, trade the car in and use your equity  towards your next lease or purchase or even get cash back!

5. Lower Taxes- When leasing you do not pay taxes on the entire value of the new leased vehicle as you would if you purchased. You are only taxed on the portion of the vehicle you use during the lease. The tax is spread out and paid along with your monthly lease payment instead of being paid all at once upfront.

6. GAP Insurance is Included- Most leases include Gap Insurance in case your leased vehicle is totalled and you still owe more than the vehicle is worth. When you purchase a new vehicle, Gap Insurance is extra , and in most cases can raise your mnthly payment $10-$20 per month.