Personal Finance Tip of the Day

Handy Personal Finance
ISBN: 9781578593224

Why do people lease cars?

  • The practice has tax benefits for small-business owners.
  • It allows you to drive a fancier car with low payments.
  • It provides an opportunity to try out a car before purchasing.
  • It helps avoid upkeep costs on the vehicle.

People lease cars instead of purchasing them outright for many reasons. If you are self-employed, and wish to deduct your monthly payments as a business expense on your tax return, you may be able to, when you lease a car. Some people would like to be able to drive a fancy, luxury car, with lower payments and cash outlay. When you lease, you may not have to put a large amount of money down for a down payment, and your monthly payments may be relatively lower than buying the car or financing the purchase of a new car. Some do not like the idea of being locked into a 60 month loan to buy a new car. Others like the convenience of being able to essentially rent such a car, and turn it in after a few years of driving. And still others lease so that they can test drive the car for a few years, and if they like it, they can get financing or pay cash to buy the car outright. And they do not have to pay for the upkeep of the car during that time, as it is a leased vehicle.

From The Handy Personal Finance Answer Book by Paul A. Tucci, (c) 2012 Visible Ink Press(R) Answers to more than 1,000 answers to questions on personal finance, its history, and managing one's financial life.

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