Owning a new car comes with a risk of big monthly costs of maintenance. That’s nothing new, but you still have other choices, and one of them is leasing a car. The next question is what is leasing a car? Is it better than buying a car? The information is as follows.
What is Leasing a Car?
A car leasing is widely known as the auto finance providing a car “rental”—a new car from a dealership—for us to rent for a particular time and miles. When you lease a car, you will usually be charged with monthly leasing costs on the car. In return, the dealership will allow you to drive the car for the length of time you pay. When the leasing agreement ends, you will either return the car back to the dealership or purchase the car if you feel like keeping it—if there is the option of that. Nevertheless, in order to lease a new car, you have to have good credit. The average credit rate is at least 724. FICO, a data analytics company, based in California, stated that the credit rate over 700 is “good” enough for leasing a car. Please note that although you don’t own the car you leased, your record of leasing-payment will be displayed on your credit reports.
Leasing a Car vs Buying One
Even if many finance experts don’t recommend you to lease a car, there are still some benefits of leasing a car—comparing to buying one. They include:
- Lower monthly leasing costs. Buying a new car usually costs much more than leasing one—you’ll need to save first or at least get a credit card to pay for it. When you lease a car, you do not have to bother affording down payment nor sales tax. The car maintenance costs are also relatively lower than owning a car even though there will be extra charges for some damages that you caused to the leased car.
- Enjoying the quality of a new car. Leasing a car means enjoying a new car every time you start a new leasing contract for a couple of years or more. You will certainly be spoiled with the most upgraded technology, model, and better comfort and safety items.
- No loan approval needed. Compared to a car loan, leasing a car does not require any loan approval. You don’t have to worry about being rejected to “rent” a car as car-leasing companies generally offer more flexibility. In case you break the leasing regulation on the contract, they will simply take their leased car back.
- No commitment that ties you up. When your leasing agreement expires, you may just return the car you have leased, or choose another vehicle to lease again, or just stop leasing at all. You may also choose to buy the car you leased if you feel that the car is worth to keep. It all depends on your negotiation with the car leasing company in advance.
Last but not least, after knowing what is leasing a car, you would know the differences in buying a car. What matters the most now is to consider living a wiser lifestyle before deciding either to lease or purchase a new car.