Auto Leasing – the Advantages and Disadvantages

Here’s a breakdown of some of the advantages and disadvantages of auto leasing: Auto Leasing Advantages:
• Auto leasing allows you to drive a more expensive vehicle than you might otherwise afford, and leaves the bulk of your cash available for other uses.
• Unlike loans, auto leasing is not considered a debt, and auto leasing car doesn't lower your earnings-to-debts ratio, which can disqualify you when you try to finance something else. (Of course, the vehicle not considered an asset, either, because you don't own it.)
• Auto leasing usually requires little to no down payment.
• Some experts recommend that you buy things that appreciate and lease things that depreciate. If you agree with this, then auto leasing is a good move for you, since most cars depreciate (lose value) over time. (In fact, most cars lose value the moment you drive them off a dealer’s lot.)
• Because you only pay for the depreciation of the vehicle over a limited time, monthly auto leasing payments can be lower than traditional car loan payments.
• Taxes and interest are spread over the term of the lease as part of your monthly payments.
• The large number of two- and three-year-old previously leased vehicles has had a positive effect on the availability of "nearly new" cars, which are often fully warranted and can be leased on much the same terms as new ones. Many manufacturers refurbish previously leased cars and offer them as auto leasing opportunities to consumers. In other words, auto leasing also extends to two to three year-old cars which can turn out to be a great value for you.

Auto Leasing Disadvantages:
• You will have spent a lot of money and have nothing to show for it unless you decide to buy the vehicle at the end of a lease period.
• In most cases, you pay more for a car through auto leasing than to buy it with cash or finance it with a loan.
• Even if no down payment is required, most auto leasing contracts require various administrative fees for processing credit applications and other paperwork. (Although if you ask, you can often have those fees waived.)
• Auto leasing tends to require a security deposit which is payable when you sign the lease. Before you sign, make sure that the lease stipulates that the security deposit will be refunded to you when the term of auto leasing ends.
• Although a new vehicle may have depreciated as much as 30 to 50 percent by the time the auto leasing period is over, through your monthly payments you will have paid interest on its full original price.
• Lemon laws may not cover some leased vehicles, so check the laws in your state or province before deciding whether or not take advantage of auto leasing.

Here are some individual situations where auto leasing may work to your advantage:
• You’re self-employed and can deduct all or part of the lease from your taxes as a business expense.
• You drive fewer than 15,000 miles per year, which is a typical auto leasing mileage threshold.
• You can’t live without having a new car every few years.

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