Leasing a car only requires you to pay for the use of the vehicle, but it does not give you the ownership of the vehicle. Whereas buying a car makes you the owner of the vehicle and you have to pay for the value of the vehicle. Car leasing is about making a monthly or any other periodical payments for using the vehicle without purchasing it. When you lease a car, you get the right to use the vehicle for a set period without owning it.
Leasing Vs. Buying on Installments
There’s a clear distinction between purchasing a car with a periodic installment and leasing a car. In both the cases, you have to make periodic payments. But, in the first case, you will gradually become the owner of the car. Whereas, with car leasing, you will never become the owner. Once the leasing period is over, you have to give the vehicle back to the owner or you can further extend the leasing period.
The monthly installment payment for owning a car is quite higher than leasing a car. As leasing does not give you ownership of the car, it only includes the depreciation costs, lease fees, and taxes. When the lease period completes, you can choose to extend the period, or return the vehicle, or even buy it at an estimated value of the car at that time.
Question:
Leasing a car is a method of financing where someone __________________.
- makes full payment for the vehicle and takes ownership.
- does not pay any fees, yet uses the vehicle.
- does not buy the car, but makes a periodic payment for using it.
- uses the vehicle for six-month free-trial.
The correct answer for the blank is:
C. does not buy the car, but makes a periodic payment for using it.
Five Key Advantages of Leasing Over Buying
Lower payments
Car leasing requires much lower payments for periodic installments compared to buying a car. You don’t need to pay for the entire cost of the vehicle. However, you can enjoy the performance and luxury of the vehicle by paying just the depreciation cost of the vehicles during lease period.
Better Access to Advanced Technology
When you buy a car, you have to use the same features untill you sell the car. Interestingly, leasing gives you the freedom to chose a new car every few years and enjoy access to new advanced technology.
Lower Maintenance Cost
When a lease a new car, you get the same warranty card as a car owner. Usually, the warranty period is longer than the lease period. Therefore, you get all the major repairing and maintenance cost covered during lease period. Conversely, a car owner has to pay the entire maintenance cost after the end of the warranty period.
Flexibility
Car leasing offers you the flexibility to choose whether to return the vehicle, buy it, or extend the lease. When you buy a car, you have no other option than using it or selling it.
Tax Benefits
Sometimes, leasing a car can give you more tax benefits than buying it. Car leasing can offer some tax deductions in case of using it for business purposes. There are very tax benefits of buying a car.
Things to Consider Before Leasing a Car
Before you legally sign a lease agreement, you should know all the terms and conditions. First of all, estimate your mileage requirement and know the lease restriction for mileage limit. Many lease provider sets a mileage limit and takes charges for exceeding the limit. You can only lease the car when leasing meets your requirements. The other essential consideration for car leasing are time period of lease, condition of the car, overall cost of leasing, and insurance requirements. Once leasing meets your requirements in every aspect, you can sign the lease agreement.
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