There are countless benefits when it comes to leasing a new car, such as a very small (or even non-existent in some cases) down payment, depending on the incentives at the time. Some leasing companies will require you to put down one or two months payments in advance, while some might give you anywhere from a month to six months before you have to make your first payment. However, you will usually need to pay for licensing fees and registration up front. When you purchase a vehicle you often need to put a great deal of money down on it, which is where leasing has the clear advantage.
When leasing a new car you are only making payments on a portion of the vehicle; essentially paying for what you use, while in the case of purchasing a new vehicle you can end up paying more for the vehicle than it’s worth by the time you’re done financing it. Much like the monthly payments you make on your mortgage, the payments you are making when financing a vehicle are divided between paying principal and interest and the amounts going to each vary with each payment.
In the first couple of years the majority of each payment goes to interest rather than principal (just like a mortgage), but in the first couple years after being purchased most new vehicles depreciate anywhere from 20 to 40% so the loss in equity is a double whammy; your car depreciates dramatically, and because the monthly payments you’ve been making have gone mostly towards interest rather than principal, you are left with very little equity in the vehicle.
It makes sense to lease because you won’t end up paying for a vehicle that’s worth nothing at the end, and you will be able to switch to a brand new vehicle when it’s time to turn your current one in, for little to no change in your monthly payments.
When leasing a new car it is important to do your research first so you will know the basics of leasing, and the pros and cons to choosing leasing over purchasing. Purchasing a new vehicle can be a very overwhelming experience so it’s important to research your options ahead of time so you know what you’re getting into and have a better understanding of what to expect. For people who have never leased a vehicle before it can seem very confusing and complicated.