Is Leasing a Car a Good Idea?

Have you ever considered leasing a car? For many Australians, leasing a car is almost a bit of a foreign concept. It’s something you only do while travelling overseas, right? Not necessarily.  

We all understand that having a car makes life a lot easier. Sure, there’s always the option of taxis and public transport, but having a car is far more convenient. A car gives you the freedom to go where you want when you please. That being said, buying a car upfront is not a viable option for everyone. 

This is particularly the case since the supply issues brought about by COVID-19 caused new car availability to fall and the price of both new and second-hand cars to jump. If you’re finding you’re not currently in a situation where you can buy a car, then you might appreciate the benefits of leasing a car instead. But how does leasing a car work?

The Basics of Leasing a Car

So, how does leasing a car work? Leasing a vehicle in Australia often has individuals or businesses making monthly payments to a leasing company. This is for the use of a car over a specified period (usually 2-5 years). 

At the end of the lease, you’ll either have the option of purchasing the car for its residual value or leasing a new car. If you no longer need a car, returning the vehicle to the leasing company is what you do. While leasing a car, you’ll be responsible for any necessary maintenance, as well as the cost of insurance.

What are the Benefits of Leasing a Car?

Leasing a car can offer a range of fantastic benefits, including:

1. Lower Monthly Payments

One of the main benefits of leasing a car is that your monthly payments are usually significantly lower (compared to the repayments on a new car loan). This makes leasing a car a financially ‘safer’ option for those who might currently struggle to manage higher repayments. Keep in mind though, that when it comes to leasing a car vs buying, car loan repayments go towards ultimately owning the car (unlike car lease payments).

2. Less Commitment

If you’re the kind of person who likes to change things up, leasing may be a good option. When leasing a car, you can easily change your vehicle, meaning you could potentially be driving a different car each year. Additionally, if you’re considering moving interstate or overseas in the next few years, and you don’t want the hassle of selling or transporting a car, then leasing could be a sensible short-term solution.

3. Warranty Advantages

One of the great benefits of leasing a car is you’ll get to take full advantage of the new vehicle warranty. Since the vehicle is usually still under warranty during the lease term, leasing could help you save significantly on maintenance costs.

4. No Admin Around Reselling

Many of us dread the time, hassle and paperwork involved in selling a second-hand car. But when you’re leasing a car, the process of returning or upgrading the vehicle is fast and simple.

5. Potential Tax Benefits

How does leasing a car work when it comes to tax? In Australia, leasing a car can offer potential tax benefits, particularly for businesses. Lease payments are often tax-deductible, providing businesses with a financial advantage. Additionally, while GST may be applicable to lease payments, businesses can usually claim a portion of it back as a tax credit.

6. Technology Upgrades

One of the other major benefits of leasing a car is that it allows you to stay up-to-date with the latest car technology. You’ll enjoy the latest safety and navigation features, without having to worry that the tech will become obsolete in a few years.

Considerations for Leasing a Car Vs Buying

If you’re considering learning how to lease a car it’s important to be aware of possible restrictions and limitations, such as:

1. Mileage Restrictions

Most car lease agreements will include a restriction on mileage. While this is usually no problem for those who work close to home, it may be less suitable if you currently travel long distances regularly.

2. Customisation Limits

Unlike ownership, leased vehicles often come with restrictions on modifications. To avoid unnecessary issues, it’s important to be aware of these limitations.

What Are My Other Options for Leasing a Car vs Buying?

If you’ve evaluated the pros and cons of leasing a car vs buying, and you’re still not sure about leasing, then what other options are available? The best thing to do is talk to an experienced car finance broker for some expert advice. They can easily explain the pros and cons of various other car financing options which include:   

• Chattel Mortgage – A loan secured by movable personal property, where the borrower keeps the property while repaying the loan.
• Hire Purchase – A lease agreement that allows the lessee to buy the item at the end of the lease term, with payments made over time.
• Personal Loan – An unsecured loan from a bank or lender for personal use, repaid in instalments with fixed interest.
• Novated Lease – A three-way car lease agreement involving an employee, employer, and leasing company, with payments made from the employee’s pre-tax salary.

Talk to ZEP Finance About How to Lease a Car

Are you keen to find out more about how to lease a car? The experienced team at ZEP Finance can help you find the best car finance option for your needs and budget. So, don’t put off getting a car any longer. Contact ZEP Finance today for a free appointment.