Daily Dupaco

Monday, August 27, 2012

Vehicle leasing: right for you?

The popularity of leasing – when the driver pays for use of the vehicle – is on the rise.

"Manufacturers started to offer better leasing options to get people into the new vehicles, because there was starting to be a shortage of used vehicles," says Bob Nicks, indirect senior lending consultant at Dupaco. "It doesn't work for everybody, but it really can be a good tool for some."

Monthly lease payments are typically smaller. But the buyer turns in the vehicle at the end of the contract, based on a set number of miles and period of time, leaving him with no equity in the vehicle.

Another option, Dupaco's Mini-Max Auto Loan, offers the benefits of leasing with the advantages of ownership.

Before you decide how to finance your next vehicle, weigh the benefits and drawbacks of each option:

  • Do you plan to keep the vehicle short-term or long-term? If you like to get a new vehicle every two to three years, leasing might be the better route. When you lease, your intention should be short-term (36 months or less), when the vehicle is still under warranty and is least likely to need repairs. If you plan to keep the vehicle beyond that, you might be better off purchasing it to avoid wear-and-tear-related expenses that can come with leasing.
  • Leasing can offer a tax advantage. You usually pay a tax on the portion of the vehicle that you're using, rather than the full purchase price.
  • Consider leasing if you plan to use the vehicle for business. Often, you can deduct leasing costs as a business expense. "Always talk to your accountant first to see if you can do it," Nicks says.
  • If you lease the vehicle, carefully structure the mileage in your contract. Every mile driven over the agreed-upon limit will cost you in the form of a mileage penalty.
  • Before you lease, read the fine print. When a dealer advertises a great leasing option, the figure normally doesn't include taxes and other fees, and it often requires a down payment. Find out whether there's a turn-in fee, an excess wear and tear clause or other fees.
  • Crunch the numbers. Use one of Dupaco's auto calculators to help you determine whether you should lease or purchase a vehicle.
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