If you have liked a particular car but do not want to go through the trouble of an auto loan and its repayment, then probably you should consider leasing. Unlike buying, it does not pinch the pocket much, as you are only paying money for using it, and that too only for a limited lease period. Moreover, once the lease period is over, you have the option of upgrading to a better car! The mechanism of renting a vehicle is more or less similar to renting an apartment. Although the process is quite simple, yet the pros and cons of leasing a vehicle should be kept in mind, before going ahead with it.
The major advantage of renting a vehicle is that it costs very less. When you lease a vehicle, you will be signing a lease agreement. This agreement mentions the monthly rent as well as the duration for the lease. The rent to be paid is a predetermined value of the depreciation of the vehicle during its usage, along with the interest. This amount is much lesser when compared to the monthly payments of an auto loan. So if you are running low on finances, renting is your best bet.
While renting a vehicle you can get tax advantages as well. You do not need to pay sales tax upfront on the entire lease amount. Instead, sales tax is bifurcated and included in your monthly payments.
Another benefit is that the lease agreement is of a short duration, usually two-three years, after which you can return the vehicle and lease another one! While leasing scores over for people who prefer variety and like to drive new vehicles, buying is good for people who want to own a vehicle and don't want to be hassled with the terms of a lease.
One more advantage of renting is that if you rent a car whose warranty period is still current, you won't have to spend money on any expensive repairs whatsoever.
People who have owned a vehicle in the past might find a lease very restricting. Most of the lease agreements come with conditions which limit the number of miles that the leased vehicle can be driven in a year. So, if you use more miles than the given limit, you might have to pay some additional fees.
Higher Eligibility Requirements
To lease a vehicle with bad credit can be very difficult. Companies always consider the credit history of the individual before renting out a vehicle, as they do not want any lapses in monthly payments. Thus, to get a vehicle on lease with bad credit, though not impossible, yet can be extremely difficult.
Expensive Early Termination
Getting out of a lease earlier than the contractual time is not easy. If the leased vehicle is stolen, totaled, or if you want to terminate the lease for any other reason, the amount that you have to pay to the leasing company, known as "gap" in financial terms, may be so expensive that even your vehicle insurance wouldn't cover it.
When it comes to renting, a person should be very careful of the extra mileage as well as additional depreciation costs charged by the company in the lease agreement. In the end, if you are someone who dreams of owning a vehicle and customizing it in accordance to the way he wants, then probably you should steer clear of leasing. However, if you like variety in your vehicles, then this is the perfect option for you.