Unless you run your own business where transportation is involved, you may be unfamiliar with leasing, which is a popular way of acquiring business vehicles due to its tax advantages. When you lease a vehicle, you basically rent it for 24 to 36 months. However, leases are available for as long as five years.
You normally have to start with an initial payment that can include the first month’s payment, a refundable security deposit, and various other fees such as taxes and registration. And then the entire cost of the least is divided into monthly payments that include interest. At the end of the lease, you can walk away from the car with no additional obligations, keep it for an additional cost, or lease a new model.
Leasing offers several advantages starting with lower monthly payments. You’re not paying for the entire cost of the car but rather for the depreciation that accrues during the time you have the vehicle. The lower payment may get you a better vehicle or a higher trim level with more features than you originally anticipated.
The shorter time period of a lease means that your car will always be under warranty. The Cadillac Bumper-to-Bumper Limited Warranty lasts for four years, for example, with the first maintenance being complimentary. You also get two years of navigation services and two years of OnStar Safety and Security Coverage. Repairs and subscriptions within these periods are free.
Leasing grants you a new car every few years with the latest technologies. At the end of the lease period, you don’t have to worry about trading in or selling your vehicle. You can leave it at the dealer or exchange it for something new.
The biggest disadvantage to leasing is that you never own the vehicle and are locked into a cycle of making monthly payments all the time. Ending the contract early can cost as much as staying with the lease contract. The number of miles that you can drive each year is capped. Exceeding that number costs extra. You cannot customize your vehicle and must return it in excellent shape with reasonable wear and tear. You may also have restrictions on where you can take the car. You may not be able to take it to Canada or Mexico.