Does anyone know the advantages & disadvantages to leasing a car?

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  • Anonymous
    1 decade ago
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    There are several advantages and disadvantages if you are talking about a conventional lease. Unfortunately, A lot of buy-here pay-here places are using the term "lease" for folks with bad credit, but in reality, for a standard lease you need better credit than you do to buy a car. A few of the advantages and disadvantages are as follows:

    1) Usually a lower payment, as you lease payment reflects only the depreciation of the vehicle and not interest on the total price of the vehicle. The biggest complaint about this is that you never "own" the vehicle, however, bear this in mind... until you pay off a car loan, you never own a vehicle under a conventional purchase, either. The bank does. A lot of people (in fact, most people) buy a new car every three to four years and have a five year loan, so in reality, they never own the vehicle any more than a lease customer does. And the lease customer has a 0% chance of accumulating negative equity, a lower payment, and if your milage fits the lease, never drives a car that isn't under factory warranty, so their maintenance costs are usually lower.

    2) If you are one of those sorts (like me) that drives a car for 10 years or until the doors fall off, a lease does you no good whatsoever, and although some banks will lease a used car, the lack of warranty and potential upkeen costs make used car leasing very unattractive to most people.

    3) Anticipating your milage is the key to a lease... if you are secure in your job, can accurtately estimate your milage, and have solid credit, a lease is almost always the cheaper way to go. If you might be transfered 100 miles away in the next few months and aren't sure what the future holds, I wouldn't recommend risking it, as high milage penalties can kill you.

    4) DO NOT sign any lease with a baloon payment, i.e. a huge chunk of cash due at the end. These are illegal in a lot of states, and in the states that do allow it, all I have ever seen is some poor guy who owes a ton of cash for a vehicle that isn't worth squat.

    5) Lastly, a basic business principle that applies here is this- If it is an appreciating asset, buy it, but if it's a depreciating asset, lease it, write it off on your taxes, and call it a day, and let your money work for you, not against you.

    Source(s): in the business
  • 1 decade ago

    The main advantage is if you use the vehicle as a business expense and deduct this expense from you taxes. The major disadvantages are you are limited to the number of miles you can put on the car, and, you do not own the car, therefore when you take it back at lease-end you just drop it off and walk away just as if you were (and in fact you are) renting the vehicle. There are options to this lease-end situation that you negotiate before you sign the lease. And since you are signing a contract, usually two year, you are stuck with the vehicle for that two years and there is a penalty if you break the lease. In general, consult a certified public accountant for the advantages and disadvantages financially.

  • 1 decade ago

    Leasing a car makes sense if you own your own business and want to "write-off" the lease costs. It can also make sense if you don't have a down payment or your credit is poor (but remember that the cheaper the lease, the fewer miles you are allowed to put on the car!).

    Leasing isn't the great deal it used to be, however, since major car manufacturers often offer 0% financing with "buyer incentives". Go to the web and use car.com or vehix.com to see what's out there to "buy" first and what financing is being offered.

  • 1 decade ago

    Advantages: Deductibility of expenses for business use with simpler record keeping. Maybe better cash flow for business use. None for personal use.

    Disadvantages: Limited annual mileage. Most ads are quoted based on 10k - 12k miles per year. Most lessors won't quote a lease much past 15k miles per year. High per mile costs for excess mileage. Frequent high charges for excess wear and tear at lease termination. Very high costs for early termination. Very confusing jargon used in contracts. Very few consumer protections in law, unlike finance contracts.

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