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Granted, most of you reading this have not considered leasing your next new or used car. If you’re like me, you were taught from a very young age that “leasing” is just for business, the self employed or the exotic driving car wealthy.
You’ve most likely asked the question when sitting at the sales desk at your local Honda dealership. The salesperson may have dissuaded you as to leasing, depending on the lending trend of the day, your job and income status, or terms of the lease available through the dealership finance department.
Leasing may be a viable short term solution for you
With many consumers wishing to trade out of a car every model year or so, they often find themselves “upside down” in a car loan at time of trade in. This is particularly problematic in the subcompact and compact car segment. Recent data suggest that subcompact cars, such as the stellar Honda Fit, and more specifically subcompact hybrids, can depreciate as much as 25% in its first year off the lot.
With most buyers walking to the table with as little cash down as possible, buying your next car can lead to a financial hit at time of trade in.
What the world’s largest automotive lease marketplace tells us
According to Swapalease.com: The customer advisor team at Swapalease.com receives a fair amount of questions from drivers, many of which are some of today's more common "myths" when it comes to shopping for a lease.
6 Lease Myths Debunked
Lease Myth #1: Captive is the better way to finance a lease. There are plenty of times when the captive financier is a good bet (Ford Credit, BMW Financial, etc.). However, some captives won't provide full flexibility in lease terms, which can cost a lot of money at the end of the lease.
Lease Myth #2: Cheapest monthly payment is best for your wallet. Often times, asking for the least amount of miles will result in a lower monthly payment. However, running over on your miles can end up costing far more than if you structured lease terms with more miles on the front end.
Lease Myth #3: Pre-owned cars can't be leased. Used leasing is becoming more popular, and lending arms such as Ally and Toyota have recently introduced structured used lease programs for customers.
Lease Myth #4: Subprime candidates aren't good for leasing. As an extension of myth #3, giving subprime candidates a lower monthly payment in a shorter amount of time (2 years, for example), would give them a better chance at making the payment and satisfying the term, as opposed to a 5- or 6-year term that involves refinancing in the middle of the term.
Lease Myth #5: I don't want to lease because I want to own my car. Most financing today comes with a 7- or even 8-year loan term. The reality is that most people will trade in their car before completing the loan term, meaning few people will actually end up "owning" their car in that instance.
Lease Myth 6: Wear and tear will hit me in the wallet at lease end. Many brands today are very interested in keeping you in the family at lease end. Even with a few dings and scratches, brands may be more than willing to forgive some of those dings and scratches when you agree to lease or purchase again with them.
A closing thought or two
Is leasing your next new or used car, minivan or light truck right for you? Truthfully, that decision hinges on several factors. How long do you intend to keep the vehicle, how many miles a year do you drive, can you write of the lease as a business expense, does your employer compensate you for miles driven, how hard are you on your vehicle, do you intend to modify or customize your new ride? Good luck!
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