|Introduction to Leasing
With the average cost of a new car rising each year, it is becoming more important to understand the options available for financing. Leasing has become a much more widespread option available to consumers through a number of different sources including automobile manufactures, local dealerships, financial institutions, and independent leasing companies.
Because of the variety of different leasing plans available, the amount of regulation of the leasing industry, and what can sometimes be a high stress situation of negotiating a price for a car, consumers need to be well informed so they can make a decision that best fits their individual situation.
Leasing is not for everyone, and it is important for you to consider things like how long you like to keep your car, how many miles you drive your car each year, how much money you want to make available for an initial payment, and how you value ownership or equity of your car.
The basic principle of leasing is that you pay only for what you use of the car. The most frequently cited advantages of leasing are that leasing requires a lower initial cash outlay, the monthly payments can be lower than a loan, and you can usually get more car for your money. Common disadvantages are that at the end of the lease you don't own the car, and you may get charged for excess miles driven and excess wear and tear on the vehicle.
The basic principles of buying your car, either with cash outright or with a loan, is that you have or are building equity toward ownership. The main advantage is that you own the car after all the payments are made. The main disadvantage is that by the time you actually own the car, it may have cost you more that the car is worth.
Our goal is that after having read this guide you will have a better understanding of the considerations you should make when choosing to lease or buy, as well as a basic understanding of the most common terms and conditions of a lease and your rights and responsibilities as a potential lease customer.
It has grown more than tenfold in less than a decade and now accounts for more than 27% of the 15 million-plus vehicles sold in the United States. Why the dramatic upsurge in leasing?
A decline in the percentage of disposable savings of Americans and changes to the tax laws are the main causes. In 1987, more than 70% of disposable savings was available for the purchase of consumer goods. By 1993 that figure had declined to less than 40%. And this year, the percentage continues its downward slide. Additionally, the many tax deductions that favored purchasing over leasing were eliminated. Since those tax laws were changed, leasing has enjoyed a steady 2% to 3% increase per year for about the last ten years.