Just about everywhere you go now in any major U.S. city or town, you’re bound to find some a Budget rent a car office Why? Because more and more Americans are renting their cars instead of outrightly buying them. Why? Because at least for now, it’s cheaper to rent, specifically to lease or rent for long term use.
For luxury vehicles, RVs, trucks and moving vans, it’s normal to rent instead of buy. After all, we use them only on certain occasions. However, ever since the Great Recession, many of us have begin turning to leasing rather than buying the vehicles that we use for our day-to-day needs too. The reason is plain and simple economics. At today’s prices, we’d be paying less for the monthly rental of a leased car than the monthly financing cost of a brand new or even a used car. According to a recent study, we’d be paying around $115 less. For a fixed monthly income earner, that sum translates to having more money to go around for food, shelter, clothing, the children’s schooling, recreation, among others.
Lease or Buy?
With leasing, the down payment is also lower than that for a loan-financed purchase. This is so because a car loan is determined on the basis of the full price of the car, while a lease is determined based only on a percentage of the car’s price. For a lease, the down payment, or initial deposit, is usually equivalent to three montly rental payments. In certain cases, dealers can even offer options wherein you can even pay no or lower initial deposit but higher monthly rentals. Depending on the cash you have available at hand and your monthly income cash inflow, you can negotiate a lease agreement that will work to fit your budget.
If you’d be fine with say a Honda CR-V, Nissan Qashqai or a Ford Mondeo, you’d also be better off with a three-year lease for the vehicle. Three years is the usual length of warranties for new cars, meaning the vehicle you are leasing is still under warranty for repairs. After three years, you can return the vehicle to the leasing company which will be the one to absorb the risk of reselling it at that future point in time.
Of course, if you can’t settle for anything less than a Mercedes-Benz or an Audi, you’d likely be better off buying instead of leasing since the resell value of these German brands do tend to appreciate over time. But of course, if you don’t have money to spare for the investment, then just lease. This way, after every three years or less, you can change cars and enjoy latest technology and safety feature updates.