What is it about aspirational vehicles that make them so enticing? Of course, there are considerations of sleek styling, luxurious interiors and a wealth of amenities, each of which serve as compelling arguments prompting us to expect something ‘more’ from our next vehicle purchase. That said, it speaks to our consumerist mindset as Americans, often seeking something bigger, better. As a status symbol, it allows us to feel competitive, the ultimate extension of ‘keeping up with the Joneses.’ Add in the fact that many of us spend more times inside of our car than we do in our own homes, and it’s easy to see why we fixate on equating vehicles with some degree of happiness. Perhaps this is why so many car-buyers overextend themselves financially in order to secure a vehicle or trim-level that might be outside of their price range: doing so provides a motivational slice of happiness.
This, of course, is where lease programs come into play for qualified buyers. From Cadillac lease deals to those offered by any competitive automaker, we empower ourselves to get behind the wheel of vehicles that might seem otherwise unattainable. But does the end justify the means? Let’s explore the pros and cons of vehicle leasing to find out why so many are choosing leasing over buying.
For most car-buyers, the act of purchasing a vehicle means the need to secure financing. In doing so, monthly car payments made for the duration of the loan, include payment back against the principal of the loan plus financing charges. Increasing the purchase price exponentially, it also creates a situation where the car-buyer can find themselves upside down in a loan. While this is a necessary evil of financing for any major purchase, it serves as a key motivator as to why some people choose to lease.
Leasing a vehicles means that there is no repayment against the principal. Since there is no intention of acquiring the vehicle long-term, a lessee is agreeing to reimburse the dealership for the depreciation of the vehicle over the life of the lease, plus financing charges. This means that the monthly payment can be significantly less than it would be if they attempted to finance it outright. This is how leasing can make a higher-priced vehicle or trim level more affordable.
There are, of course, implications associated with any new vehicle, including the expectation of trouble-free ownership for a certain period of time. If well-maintained, one might expect a new vehicle to go three or more years without any need of major repair work. Should you choose to purchase a used vehicle, the expectations might be reduced somewhat (unless it was offered under a Certified Pre-Owned program). Eventually, however, the vehicle will require work to be done; work which may not be covered under an original (or remaining) warranty.
Leasing eliminates any of these concerns by allowing a driver to enjoy a vehicle during its most trouble-free years. Imagine being able to drive off in a new vehicle, only to return it (at the end of the lease terms) before any major issues being to occur…
But should there be any need for work or repair to be done, leased vehicles are almost always covered by the manufacturer’s warranty. This is in addition to the cost of any scheduled maintenance, most of which will be included as a conditional clause of the lease agreement itself. Not only does this eliminate cost, but it eliminates the guesswork as to what kind of care that vehicle will require, and how that care should be scheduled.
Advantage: Depreciation & Trade-In
Here’s a scenario. You purchase a vehicle for $30,000 and drive it off the dealer lot. As you do so, you experience crippling buyer’s remorse. Negotiating a U-turn, you pull back into the lot and attempt to resell the vehicle the dealership. In theory, that vehicle depreciated by as much as 11% the moment its front tires hit the street. That means that the dealership might only be required to pay you around $27,000 for the $30,000 vehicle you just bought moments before. Trading it in down the road means an even lesser return on your investment. After a year, it’s worth up to 25% less. After three years, it’s value has decreased by nearly half; and after five years, it will be worth approximately 63% less than what you paid for it. This means a lower trade-in value against your next vehicle purchase.
Leasing eliminates this concern. While your payment is built around offsetting the vehicle’s depreciation, the end of a lease agreement means the ability to return it without further question. If properly cared for, it’s a hassle-free opportunity to move from one vehicle to another, without any concern of depreciation or trade-in negotiations. Simply pull-up and drop-off.
Downsides to Leasing?
Of course, there are pros and cons to anything. By leasing a vehicle, you are driving a rapidly depreciating asset meaning that (while monthly payments are lower than if bought) the total cost will usually be comparable. Also, keep in mind, that cyclical leasing means that payments go on indefinitely (as opposed to buying, where you eventually own the vehicle). And, as opposed to an owned vehicle, you lack the ability to modify or personalize the vehicle.
And what about fees? Whether applied due to excessive mileage, improper care of the vehicle, or an attempt to terminate the lease early, fees can be levied against a lessee as part of the lease agreement. These can minimize any potential savings, meaning that you should consider whether or not the expectations of a lease agreement suit your lifestyle and commuting demands.
Making the Decision
It really is a personal choice. That said, the ability to drive the vehicle of your dreams is an empowering one, as long as it makes sense for the unique demands of your budget and lifestyle. Explore the leasing options offered by your manufacturer and dealership of choice, and weigh them against the option of financing the vehicle. With the right factors taken into consideration, you’re likely to reach the option that’s perfect for you.