"Own assets that appreciate and lease or rent assets that depreciate." - J. Paul Getty
As the cost of vehicles continues to rise, the Heritage Atlanta dealerships have found a way to get you the monthly payment you desire while still driving the new vehicle of your choice. Lease it! Many professional Financial Advisors agree that unless you plan to keep your vehicle 6 years or longer and you must finance because you can't afford to pay cash, you should at least consider leasing.
The concept of leasing is pretty simple. You are guaranteed a future trade in value at the end of the term you choose. But, instead of the bank giving you credit for it then, they give you credit for it now and only charge you for the period of time you drive the car. That is why the payment is lower. But, because possession reverts back to the bank at the end of the lease, the lessor has an expectation of a pre-determined amount of mileage per year and average wear and tear. That is certainly understandable.
Our experience indicates that the biggest objection people have to leasing is, "I don't own anything at the end of the lease." To that point, studies show that most people attempt to trade their vehicles after about 3 years of ownership. However, due to 60 month or longer finance terms and the accelerated depreciation that most vehicles experience, when owners attempt to trade, the only thing they own is thousands of dollars of negative equity. But, the worst part is, had the vehicle been leased for 3 years instead of financing it, the initial investment would have been lower, the monthly investment would have ben the same or slightly lower and at the end of the term, there would be no negative equity. Most people just don't know about leasing. So, to better educate you, listed below are the advantages and disadvangates of leasing. Take a look and see if it is right for you.
Lower Payments
Payments on a lease are lower than financing because you are only paying for the term of your usage.
Upside Down
Never worry about being "upside down" or in a negative equity position where the value of the vehicle is less than the amount you owe.
Eliminate Negative Equity
Why add your negative equity to your next auto loan and create an even bigger future problem? Instead, add the negative equity to a short term lease, enjoy a comparable payment and start fresh at lease end.
Always have a Payment
For most people, a car payment is like a house payment. You will always have one, so why not drive the new vehicle of your choice every 3 to 4 years?
Asset Sense
You should buy items that appreciate and lease items that depreciate. For example, most people would not be too excited about paying $30,000 for a stock portfolio if they knew that it would only be worth $15000 in 4 years. J. Paul Getty said it the best, "Buy assets that appreciate and lease or rent assets that depreciate".
Low Risk
A bank or lease company is assuming the total risk of what the vehicle will be worth in the future. If your vehicle suffers accelerated depreciation in the market place for any reason, the bank takes the hit, not you. Good examples are Audi in the 1980's after the 60 Minutes television special and large V8 sport utility vehicles when gas was $450 a gallon.
Flexibility
You do not have to give up the option of owning the vehicle, you can just postpone it. This gives you time to make sure that its the right vehicle for you. That just makes good sense with the advances in technology and safety that have the potential to make your vehicle outdated quickly.
High Mileage Driving
Most people believe that leasing is only for low mileage drivers. But, actually hight mileage drivers can benefit even more by applying for extra miles up front, usually at a reduced rate. A high mileage lease completely separates you from the depreciation of high mileage driving. Plus, it also eliminates the pain and hassle of disposing of that high mileage vehicle when the time comes. Heritage Atlanta dealerships specialize in designing affordable leases for high mileage dirvers.
Win Win
In many cases, the residual value is comfortably high resulting in lower monthly payments. At the end of the lease, the leasing company absorbs the loss, not you.
Warranty
The short-term lease leaves you covered under your factory warranty, allowing worry free driving with no unexpected repair bills.
Drive a Nicer Vehicle
High residuals allow you to drive a $5000 to $10,000 more expensive vehicle for about the same montly payment as financing.
Tax Savings
In states wth sales tax, you only pay tax on your montly payment, not on the whole vehicle. And in some cases, the entire lease payment may be tax deductible. Heritage Atalnta dealerships specialize in designing tax deductible business leases.
Your Options at Lease Maturity
Return it to the bank and pay only a small disposition fee
Sell the vehicle and keep any amount over the residual
Trade it in on a new vehicle
Buy the vehicle for the residual amount
Lease Terminology
Cap Cost - The purchase price of the vehicle plus the bank acquisition fee
Acquisition Fee - A fee charged by the lender for originating the lease
Cap Cost Reduction - Any trade equity, cash or rebates used as a down payment to reduce your monthly payment
Residual - A guaranteed trade-in value when you originate the lease
Disadvantages of Leasing
The only disadvantage to leasing is a slightly higher payoff vs. a retail installment loan if you decide to terminate the lease early. Remember, the bank has guaranteed you a future trade in value, but has given you the credit for it at lease inception. So if "you" decide to terminate the contract, their trade in value is no longer guaranteed. So, the payoff calculation is the remaining payments, minus the unpaid interest, plus the residual value. It won't be more than what a retail installment contract would be at that point in the loan, but it will be slightly higher.
A common misconception about leasing is that it is only for drivers who drive 12000 to 15000 miles per year. But, you can basically tailor a lease to have any annual or total mileage you desire. But, even if you go over the allotted annual mileage set up in the lease, the mileage penalty is still less, in most cases, than the actual vehicle depreciation. This is good for the lessor.
Lastly, there is a common misconception that there are strict "excess wear and tear" guidelines. In most cases, each lessor will have an amount that they will waive relating to excel wear and tear. This provides additional savings for the lessor as if they had purchased and traded, any wear and tear would result in a deduction from the appraisal value. So, again, this is good for the lessor.
We stand behind the belief of many financial advisors: "Unless you plan to keep your vehicle 6 years or longer and you must finance because you can't afford to pay cash, you should at least consider leasing."
