Getting the desired new car without burdening the family budget is like a mission impossible for many people. Fortunately, thanks to car lease, this dream can come true. This term refers to a certain type of investment activity aimed at acquiring property, as well as its transfer on the basis of a special leasing contract. It is meant for both individuals and legal entities who agree on the period and the necessary conditions, provided in the contract. In this case, the lessee can purchase the car in the end if they want to. Like any other financing option, car lease comes with advantages and disadvantages and we will review the most important of them:
Car Lease – Benefits
Car lease has plenty of benefits compared to alternative forms of use or acquisition of assets. Of course, each plus or minus has a different weight for the different lessees. That is why it is very important to carefully weigh the pros and cons before signing a contract.
- Lower payments – One of the main advantages of car leasing are the lower payments. If you want to keep your monthly spending under control, it would be a better idea to lease a new car instead of buying one. When you take out a car loan you might not be able to afford such a new model as with leasing.
- Ability to plan the costs – With car leasing both the costs and the accompanying VAT can be planned. With a full-service operating lease, even the maintenance and consumable costs of the asset in use can be planned.
- No long-term commitment – When your contract for a car lease ends, all you have to do is hand the vehicle back. There will be no further fees and you can start a new contract for another car. In this way, you can move on without having the trouble of finding buyers and selling the car.
- No expensive repair bills – Another great advantage of car leasing are the minimal maintenance costs. Usually, the deals are for brand-new cars, which are covered by the manufacturer’s warranty. Such vehicles are less likely to get damaged, but if something happens, the lease company should fix it. Lots of people decide to take a used car loan and regret it later because of the high repair bills.
- Flexibility – Many variables are used to model the lease transaction – down payment, lease term, residual value, etc. So, you have more options compared to taking out a car loan. The different combinations between the variables make it possible to adjust the leasing service according to the capabilities and wishes of each individual customer. This benefit is particularly applicable to operating leases where the term of the contract can be as little as a few months. It’s not sure if you will get such flexible terms if you take a used car loan.
- Tax advantages – in Bulgaria and around the world these tax benefits are only for companies that use leasing. They can be related both to the reduction of some tax obligations and the rescheduling of the payment.
The Disadvantages of Car Leasing
In some cases, car leasing might not be the best option. Let’s see what the drawbacks are that you should take into consideration in advance.
- Not owning the car – The main disadvantage of a car lease is that you don’t actually own the car you are paying for. This is the reason why the payments are lower. The client gets nothing back when the agreement ends.
- Damage charges – Although you don’t have to pay for various mechanical parts as they are covered by the warranty, the company will expect you to return the car in good condition. Otherwise, you will be charged for the damages. Here is why many people prefer to take online loans, add their savings, and buy their own car.
- Restrictive terms and conditions – Some leasing companies’ terms are very restrictive. They tend to charge extra fees or make customers pay more if they want to return the car before the end of the contract. Lessees are often subject to extensive credit history checks as well. There are no such checks for online loans which can help you finance the purchase of a car.
Is There a Better Alternative than Car Lease
At first glance, the car leasing service has many advantages. But still, there are serious disadvantages that should not be underestimated. Let’s not forget every case is individual, and if you are interested in leasing, you must evaluate your financial situation attentively. If you decide buying is the better option, there are plenty of online loan offers with flexible terms that may be of use to you.
