On the surface, leasing can be more appealing than buying. Monthly payments are usually lower because you're not paying back any principal. Instead, you're just borrowing and repaying the amount that the vehicle depreciates in the time you have it, plus finance charges.
Here are the major advantages of leasing:
- You drive the vehicle during its most trouble-free years.
- You're always driving a late-model vehicle, and one that's usually covered by the manufacturer's warranty, which may include scheduled service and maintenance.
- You can drive a higher-priced, better-equipped vehicle than you might otherwise be able to afford.
- You don't have to worry about fluctuations in the vehicle's trade-in value or go through the hassle of selling it when it's time to move on.
- There could be significant tax advantages for business owners.
- At the end your request the Leasing company to fetch the vehicle.
The downside of leasing
As attractive as a lease may appear, there are a number of disadvantages:
- If you lease one vehicle after another, monthly payments go on forever. By contrast, the longer you keep a vehicle after a loan is paid off, the more value you get out of it. Over the long term, the cheapest way to drive is to buy a vehicle and keep it until the wheels fall off. Which would not apply to a person living and working in South Africa for a short to medium term.
- Lease contracts specify a limited number of kilometers. Contracts are generally managed by the leasing company and they recommend restructures to the original contract to ensure that actual utilisation is accommodated. If the vehicle is returned with higher mileage than agreement then limit, you'll have to pay an excess kilometer penalty. Unfortunately, you don't get a credit for unused miles.
- Vehicles do need to be returned in fair condition, any repair that can be determined as an insurable event should be fixed prior to the vehicle being collected by the leasing company.
- If you need to get out of a lease before it expires, you may be obligated to pay the early termination fees and penalties.
Does it make sense to lease?
If your goal is to have both low monthly payments and drive a new vehicle every few years with little hassle, then leasing is probably worth the additional cost.
