Leasing FAQ
Leasing FAQ
What is leasing?
Leasing is an alternative way of paying for the use of a vehicle. Lasing is a way to drive a new vehicle as often as possible with as little money changing hands as possible. No wonder this simple concept is becoming so popular! There are many misconceptions of leasing, that leasing is for business use only, or leasing is for low mileage drivers, or there's no equity in a lease, leasing is the same as renting, leasing requires a large payment at the end, you can't trade in your vehicle on a lease, to name a few. The leasing industry is exploding because with lifestyle changes, tax law changes, inflation, and more serviced-oriented society, more and more people are realizing the benefits of leasing.
Ownership vs. Leasing
Many Honda customers are leasing right now, they just call it owning. Does the bank own your car, or do you have clear title to your automobile? If you dispose of your automobile prior to paying it off and taking clear title to it, then you merely have the use of the vehicle for a portion of its useful life. Even if you do become an owner, long-term automobile retention has it's disadvantages. You now have an automobile worth a fraction of its original value that may not be as safe and reliable as it once was. Inevitable repairs can be costly as well, time consuming and inconvenient. So, do you drive the old vehicle that you own and hope it does not break down, or do you acquire a new automobile and another monthly payment?
Leasing vs. Buying
Typically, leasing is ideal for someone who changes vehicles often enough to always have a monthly payment. Buying is more suitable for someone who retains a vehicle for many years. So, the magical question is: "How long do you keep an automobile?" If there are no tax considerations, the financial comparison is virtually a tossup. If you use the vehicle for business, the comparison will almost always weigh on the side of leasing.
Lease Structuring
A well-written lease should be for the proper term and based on an honest assessment of the lessee's annual mileage, wear and tear, and trade cycle. Everyone likes low payments, but it is important that your payments reflect your actual usage. The majority of the leases we write are closed-end/purchase option leases. This type of lease allows the lessee to "walk away" at the end provided the vehicle is within mileage and wear and tear limitations. If the vehicle happens to be worth more than the purchase options at the end, the lessee can still buy the vehicle for the purchase option and pocket any profit.
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