Looking for a new car but no idea how to finance it? Well, you might want to consider the car lease, and no, we’re not kidding. The car lease is fast becoming one of the most convenient and popular ways for Australian drivers to get behind the wheel of a brand new car. But what is a car lease and is it really that good? Well, we’re glad you asked.
What is a car lease?
A car lease is when you borrow a car under a contract which allows you the use of the car for an agreed-upon period (usually two to three years). All you need to do is drive an average number of kilometres a year and make your monthly payments.
Once you get to the end of your contract, you can then choose to trade in the car for a newer model and restart the lease agreement. It’s often used by companies or business owners who can claim their leasing costs as a tax deduction.
Sounds simple enough, right? But what’s so good about it?
The benefits of a car lease
You get a new car every couple of years
Okay, so this is a big one. The option to upgrade your car before the warranty runs out is a really attractive perk especially for those who spend a lot of time behind the wheel. It’s also pretty enticing to those who simply like a shiny new car every couple of years.
You don’t need to pay a huge deposit
The car lease offers drivers the perfect opportunity to get on the road for less. There’s no huge deposit to pay, and if you choose to renew the lease at the end of the contract, you just need to keep up your monthly payments.
Your running costs are covered
No unexpected maintenance bills, no tyre replacement costs, no tax; this car lease thing is sounding better by the minute. But seriously, use this tool to calculate your lease payments, and you’ll see that it’s actually quite affordable when you consider everything that’s included.
However, as with everything, there are some potential downsides such as:
* You don’t own the car and therefore can’t modify it. But you don’t really need that massive tailfin anyway, do you?
* You can’t claim the car as an asset if you need to borrow money. But this could be a good thing too, right? Limiting your potential to borrow can help you kepp more control over your finances.
As you may have guessed, we’re quite impressed by the pros of the car lease, and we’re not really surprised that it’s becoming a popular option for those in search of a new car.
Interestingly though, we’ve found that many people assume that this kind of finance product is for business owners only. While that may be true to a certain extent, there’s also the novated lease to consider. This particular leasing option is perfect for those in employment and who are willing to sacrifice part of their pre-tax salary to make their lease payments. And it’s this option that we’re getting a lot of queries about lately.
So to answer the question, buy or lease? It’s all down to how much you have to spend. If you can afford monthly payments but can’t really manage to save a deposit, then the lease is a great option. If you like to upgrade your car regularly, then yes, the lease is also your friend. However, if you prefer the idea of outright ownership of a vehicle and keeping long-term spending to a minimum, then perhaps buying is a better option for you.
Either way, keep your options open and always talk to your friendly neighborhood finance broker before you make any decisions.
As Australia's largest car finance broker, Stratton Finance know a thing or two about loans and finance. With over two decades of experience in the field they are one of the most trusted authorities in the industry.
