When purchasing a new car, leasing is undoubtedly the way to go. On the flip side, when considering purchasing a pre-owned vehicle, it may be wise to opt for financing.
Because of the way it is structured, leasing a car reduces your monthly payment. You pay only for the portion of the vehicle you use, resulting in a lower monthly payment bill.
Lower transportation costs mean more money for saving, investing, or entertainment.
With leasing, your car will also always be under warranty. Most vehicles in the market come with a three-year warranty, which covers the entire duration of a typical three-year lease.
This means no unexpected costs for mechanical failures during your lease.
Leasing is becoming more popular in the automotive industry, particularly for EV (electric vehicles) adoption, as it is seen as a growth accelerator.
Despite the ongoing efforts, Kenya’s electric mobility industry remains in its early stages, with approximately 671 electric motor vehicles currently on our roads.
With electric vehicles being the future of mobility, stakeholders are investing in new business and financing models.
Stakeholders are promoting leasing options with lower monthly payments to make it easier and more affordable for people to drive and get into the cycle.
There are several reasons why leasing may be better than financing for specific situations.
Firstly, it reduces monthly payments. Lease rentals are more attractive as they are lower than equated monthly instalments (EMIs).
You pay for the portion of the vehicle’s value used during the lease term, not the entire value. Leasing is a more affordable option because you don’t pay back any principal amount.
Secondly, leasing can ease the financial burden of monthly payments and create job opportunities in the taxi industry. It helps the lessee manage monthly cash flow and reduce initial expenses.
Thirdly, leasing a vehicle usually has lower upfront costs than financing.
Usually, the security deposit and first month’s payment are lower for leasing than for financing. In leasing, the residual value discount is applied on day 0, resulting in lower monthly lease payments.
Financial advisors recommend making a large upfront payment to lower monthly payments and principal amounts when buying a new vehicle.
Leasing a vehicle involves a low-down payment and a fixed monthly payment.
Fourthly, leases often include insurance, maintenance, and repair coverage, which covers battery replacement costs that can make up almost half of the vehicle’s total cost.
It may save the lessee from unexpected expenses. Lease arrangements can save money on maintenance and repairs as they usually cover most of the repairs.
Unlike financing, the lessee doesn’t have to pay for insurance, maintenance, and repairs. These expenses can accumulate over time. It reduces car value stress and selling hassle.
Fifthly, leasing offers the opportunity to drive a new car every few years. Drive the latest model at a lower monthly cost, appealing to those who like to keep up with technology and features.
With loans, you’re not usually locked into the vehicle for the entire term and don’t have to enter new leasing terms with a different owner.
Lastly, a lessee can buy the same vehicle they leased at a lower price than a new one if they enjoy driving it. Leasing allows the option to purchase the vehicle at the end of the lease, giving flexibility to the lessee.
The choice between leasing and financing depends on your needs and finances.
Leasing is a good option for those who want to start with a lower down payment, while financing is better for those who want more control over customisations, mileage, and the vehicle itself.
Many people who can’t afford a luxury car choose to lease one for the high-end experience. Consider your budget, driving habits, and long-term goals when deciding.
Mr Flora is a veteran journalist and freelance writer based in Brampton Canada.
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