There are countless benefits when it comes to leasing a new car, such as a very small down payment (or even no down payment in some cases), depending on the incentives at the time. Some leasing companies will require you to make payments one to two months in advance, while others may give you anywhere from one month to six months before your first payment is due. However, you’ll usually need to pay license fees and registration upfront. When you buy a vehicle, you often need to put a lot of money into it, which is where leasing has a distinct advantage.
When you lease a new car, you are only paying for part of the vehicle; essentially paying for what you use, whereas in the case of buying a new vehicle you may end up paying more for the vehicle than it is worth when you finish financing it. Just like the monthly payments you make on your mortgage, the payments you make when financing a vehicle are divided between the principal payment and interest, and the amounts that go toward each vary with each payment.
In the first few years, most of each payment goes toward interest instead of principal (just like a mortgage), but in the first few years after purchase, most new vehicles depreciate between 20 and 40%, so the loss of principal is a double whammy; Your car depreciates dramatically, and because the monthly payments you’ve been making have gone mostly toward interest rather than principal, you’re left with very little equity in the vehicle.
It makes sense to lease because you won’t end up paying for a worthless vehicle in the end, and you’ll be able to upgrade to a new vehicle when it’s time to turn in your current one, for little to no change. in your monthly payments.
When leasing a new car, it’s important to do your research first to learn the basics of leasing and the pros and cons of choosing to lease over buy. Buying a new vehicle can be a very overwhelming experience, so it’s important to research your options early so you know what you’re getting into and better understand what to expect. For people who have never rented a vehicle before, it can seem very confusing and complicated.