Although this form of accessing a car has its benefits, it isn't for everyone. What are the benefits? First, you get to drive a new car every few years. For those of us who need to be using the newest technological and safety innovations, leasing gives us that privilege. There may be tangible benefits associated with the newest safety system, but most of the benefit is probably from the ability to show off to your friends the newest car each time it comes out. This reason depends on your lifestyle but for some of us, it may be a necessity.
A financial reason to lease instead of buy a car is that you usually have lower monthly payments than if you got financing to pay for your car. The reason is that you are mainly paying for depreciation of the car which is the amount of value used up by driving the car. For example, a $20,000 car with an expected life of 5 years would be depreciated $4,000 a year ($20,000/5 years = $4000/year). The basic idea is you would be paying $8000 over two years to lease a car rather than making payments for the entire $20,000. Obviously, you aren't only paying for the depreciation of the car but you aren't paying for the entire car which is why monthly payments are usually lower. Generally, European and Japanese cars have lower depreciation than American cars and are generally cheaper to lease.
Another big benefit for leasing is the avoidance of the hassles that come with owning a car such as repair bills. This is probably a bigger benefit when comparing to buying used cars which have a much higher risk. You are paying for the benefits of not having to worry about some of these issues since the car won't necessarily belong to you at the end of the lease term. This also means you should pay close attention and get the most basic car when looking at cars to lease since you probably won't be getting the benefits of ownership that come with some of the extra accessories such as an undercoating or security system. All leases should also come with GAP insurance which covers the difference between what you owe on the lease and the remaining value of the car if it happens to get totaled in an accident or stolen.
To summarize some of the benefits of leasing:
- You get a new car frequently
- Short-term affordability with lower monthly payments
- Fewer repair bills and risks associated with car problems
Update: I also receied some more helpful information from a friend of mine who is more experienced in this area. Read the comments below for more details.