FIVE MYTHS ABOUT CAR LEASING: FORGET WHAT YOUR FRIENDS TOLD YOU
Because the car leasing process was built on a foundation of confused consumers, manipulative dealers, and hidden fees, it doesn’t really come as a surprise that there are some well believed myths about the process altogether. If you’re looking for clarity, look no further! Here is a list of some myths about car leasing that we thought could use a little straightening out:
1.Buying is always cheaper overall than leasing
Not always true. While buying may be the route you want to take if you plan on keeping your car long after your loan is paid off, it may not be the cheapest option for you if you’re looking for something a little more temporary. For example, you could lease a car for three years at a monthly payment of $460. After your three years are up, you turn in the vehicle at the end of your lease and walk away free and clear. If you were to buy the car with a five-year loan, however, your monthly payment could be around $515, and own the car after you’re the five years are up.
BUT, if you were to hypothetically change your mind and want another car after three years, you’d have to match the residual written into a three year lease, and would probably have to resort to privately selling your vehicle rather than trade it in – and THEN pay off the loan.
This leaves you with about $1500 less in your pocket.
2. It’s impossible to get out of a lease early
Also, not true. You actually have two options to get out of a car lease early. You could:
- Pay the early termination fees to essentially make up for the gap between how much you’ve already paid on your lease and the rest of your leasing contract
- Transfer your lease and avoid early termination fees altogether. Carvoy provides a lease transfer service, which matches consumers looking to get out of a lease with consumers who are in the market for a short lease to take over. The latter simply takes over the leasing contract and pays off the rest of the lease for you.
3. I can’t bring my leased car with me if I move states
Not true. You may take your leased car anywhere for any amount of time within your leasing contract as long as you notify your leasing company. This is not a practical measure so that they know where to send your bills, but also so that they can adjust your monthly sales tax (either up or down depending on where you’re moving to).
4. You will be charged for even the most minor damages at the end of your lease
Not true. Most leasing contracts are super specific about what kinds of damages are covered and what kinds of damages are not – and those specificities are usually pretty lenient. You will inevitably cause average wear and tear to your vehicle and leasing companies recognize that.
5. Tax breaks are only for businesses leasing a car
Nope. While it’s true that business are allowed to deduct monthly car lease payments as expenses, individual consumers may get tax breaks as well. In most states within the US, sales tax is only paid on the monthly payment, not the sale price of the vehicle (which is usually double the monthly sales tax).
States that charge sales tax on the entire sale price are Arkansas, Texas, Virginia, and Minnesota – the remaining 46 states give you a break.
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