If you are in the market for a new car, choosing the best option for financing the vehicle can be tricky. But having a basic understanding of your options, will at least give you an idea of how good a deal you can get. Now you don’t need us to tell you that buying a car is a significant expense, and for that reason alone it makes sense to take a look at some of the more affordable options on the market. And one such option is the car lease. So let’s take a look at the benefits of leasing a car.
Car leasing is a convenient way to get a new or used car in exchange for a monthly payment. When leasing a car, payment will be paid only for the number of years in the lease agreement which means that there’s no significant cash outlay on your part.
Most of the time, leasing is used for buying new cars but leases for used cars, while rare, are not unheard of. When leasing, you make a small down payment which is then followed by a monthly fee for the term of the lease. When the contract period is over, options are there to pay either the residual value or to return the car. There are a few different leasing options and here are the most popular.
Novated leasing – If an employer provides salary packaging for employees, then novated leasing is the best option. A novated lease is a car finance option wherein the employer will make payments for the car on behalf of the employee from their pre-tax income for the period of the contract. Choose this option and your taxable income is reduced which means you pay less tax. Sounds great, right?
At the end of the lease period, a residual amount remains. Also known as a balloon payment, this needs to be paid to the financer if you want to keep hold of the car. As you can imagine, this type of lease is a real money-saver and a very popular option.
Operating Lease – The operating lease is very common with business owners and a good option for those that want to keep costs to a bare minimum. This lease involves using a car for an agreed upon period and then returning it to the financier upon completion of the contract. There’s very little initial set-up cost and leasers rarely take up the option to purchase at the end of the contract.
Financial Lease – A finance lease is a little different to an operating lease in that the financier agrees to lease the vehicle for what is considered the major part of its useful life. There is also usually an obligation to buy the vehicle outright at the end of the contract by making a balloon payment.
Benefits of leasing a car
Surprisingly enough the benefits of leasing a car are often disregarded as many people assume that it’s an option only for business owners. And while it is of course a great option for companies, the benefits make it a viable option for anyone that wants to get behind the wheel of a new car with a minimum of fuss.
Check out these benefits.
Leasing has the safety net of a full manufacturer’s warranty, and on top of that, you can choose from the latest models on the market.
Leasing allows you to upgrade your car every couple of years with no major financial outlay.
Less upfront payment as you’re not expected to pay a huge deposit at the start of your lease. In fact, the initial cost is often quite low.
You get some pretty good tax benefits from leasing as opposed to buying. This is particularly true of the novated lease. Pre-tax payments? That has to be good, right?
The lease is a good option for people that travel often and regularly need the use of a car in different locations.
Leasing is an excellent choice for business owners who don’t want their money tied to a depreciating asset.
For business owners, cash flows can be managed better with a single consolidated monthly payment which also includes maintenance.
No obligation to buy – At the end period, there is no condition or requirement to purchase the vehicle and make the residual payment.
While there are a few drawbacks to leasing, the inability to modify your car is a small price to pay for the low costs, tax savings, and lack of maintenance costs. So whether you’re considering a new ride for the weekend or a new car for your business, check out your leasing options from a finance broker like Stratton Finance. Choosing to use a broker for your car lease not only helps you find great value on the market but also saves you a lot of time and effort. Seems like a no brainer, doesn’t it?
As Australia's largest car finance broker, Stratton Finance know a thing or two about loans and finance. With over two decades of experience in the field they are one of the most trusted authorities in the industry.