Leasing a car might sound like a difficult term to understand. It might sound like a newer market gimmick to loot honest customers. Somewhat like an interest backed loan with nasty hidden costs, it might seem like a thirsty attempt to lure customers into owning expensive vehicles.
However, unlike such loans or other gimmicks of the market, leasing a car is quite different. In simple terms, it allows you to own the car for as long as you need it. Yes, you read that right!
When you lease a car, you get to keep it for a certain amount of time or distance in kilometers, as set by your payment terms with the leasing company. Ideally, you would be making monthly/quarterly/yearly payments to your car provider for owning the vehicle. As your lease period ends, you can sometimes choose to buy out your lease if you want to keep the car for the rest of your life, or return it to the company as per terms.
Although this might seem like it is quite similar to a car loan, it is different at the same time.
In a lease, you will be paying the company simply to keep the car as your daily driver.
In a car loan, you would be paying for the equity (value) of the car which would be diminishing (neglecting depreciation) with each EMI payment.
In a car lease however, you would only be paying for the ability to keep the car for your desired amount of time. The equity of the car will remain the same at the end of your lease tenure. Here, you can choose whether or not to keep the car by choosing to purchase.
Note that you would be paying much less than a car loan (per month) to lease a car.
Just like a car loan, you would be filling agreements before the commencement of your lease. Some of the terms you would read in your lease documents may include ‘open end vs. closed end leases’, ‘capitalized cost’, ‘residual value’, ‘depreciation’, etc. Make sure to understand these terms clearly before agreeing on your lease.
Is it the right option for you?
Although leasing seems like an attractive idea, you must remember that you won’t automatically own the car at the end of your lease tenure. Leasing is a great option if you:
- Want the car for a fixed/short period of time.
- Want to try newer vehicles.
- Want to try what vehicle works for you.
- Want to save up on taxation.
- Don’t want to own a car.
- Want the convenience of vehicle management.
When you lease a car, you only pay for your usage. Simple! Apart from wear and tear or regular depreciation, there are no other charges hidden underneath an average lease plan. You will save up a lot of money on maintenance, down-payment, insurance, and several other charges. The lease amount you pay for your vehicle is also eligible for tax relief.
For the best deals on leasing brand new vehicles that are customized to your taste and tang,