Vehicle leasing

Vehicle leasing is the leasing (or the use) of a motor vehicle for a fixed period of time at an agreed amount of money for the lease. It is commonly offered by dealers as an alternative to vehicle purchase but is widely used by businesses as a method of acquiring (or having the use of) vehicles for business, without the usually needed cash outlay. The key difference in a lease is that after the primary term (usually 2, 3 or 4 years) the vehicle has to either be returned to the leasing company or purchased for the residual value.

Rationale

Vehicle leasing offers advantages to both buyers and sellers. For the buyer, lease payments will usually be lower than payments on a car loan would be. In most states, any sales tax is due only on each monthly payment, rather than immediately on the entire purchase price as in the case of an instalment sale or loan. Some consumers may prefer leasing as it allows them to simply return a car and select a new model when the lease expires, allowing a consumer to drive a new vehicle every few years with no worries of having any negative equity upon turning their vehicle in unlike when one trades in a purchased vehicle after only 2 or 3 years of ownership. The lease vehicle is in theory always under factory warranty therefore the lessee doesn’t have to pay for repairs. A lessee does not have to worry about the future value of the vehicle, while a vehicle owner does. Almost all leases include a fixed purchase price at lease end so if the vehicle is worth more than the predicted value, the lessee can buy it but if it is worth less, the lessee can return it.