In the past, car leasing was mostly associated with wealthy car buyers and those who wanted to drive a better car than they could afford.
In recent years, however, local car dealers have noticed a shift towards leasing being the most preferred way to get a new car.
According to Brenda Delyser at Tradition Chevy-Buick-GMC-Cadillac in Newark, 60 to 70 percent of her new-car sales aren’t sales, but leases.
“It’s been like this for the past three or four years that I’ve been here,” Delyser said. “People are payment-conscious and they also want warranty.”
The reason for the change in buying habits, Deysler said, is the market nd the fact that customers have begun asking why they should purchase a vehicle, if it’s not worth anything when they’re done using it.
“It used to be that people would say ‘Oh, I have all of this equity,’” Deysler explained. “They don’t say that anymore, because of the way that the market is right now.”
Monthly payments for a lease are determined by the bank, not the dealership, so rates don’t vary among dealerships. Delyser said that, on average, the monthly payments on a purchase are typically $100 more than with a lease.
“The best lease is 39 months. Once the 39 months is up, you have to decide if you’re going to keep the vehicle or if you’re going to turn it in,” Delyser acknowledged. “Most likely, you’d turn it in and get a new vehicle with the same payment.”
John Killian at Cavallaro-Neubauer Chevrolet-Buick in Williamson said that the leasing offers many advantages over buying that appeal to customers of all ages.
Though he noted that the most common ages of customers who lease are between 30 and 50 years old, he also said many parents will lease vehicles for their children who are going to live on college campuses, because they don’t drive often.
The biggest disadvantage to leasing a vehicle is that there are mileage limits for the lease term and customers receive penalties for each mile over the limit they go.
Killian explained that most leases allow 10,000 miles annually and that the overage charges amount to 25 cents per mile. There are higher mileage plans available. The maximum allowed from GM Financial, which is the bank that GM uses, is 22,000 miles, according to Killian, “If you have a change of job, if you move or whatever, you have to commute farther, that does limit you,” Killian said. “Once you take delivery of your vehicle, the contract is pretty much in stone, so it’s important to predetermine beforehand a sufficient mileage amount.”
Harold Boerman, owner of Boerman Tax Accounting in Marion, said that he has been leasing cars for years. He said that there isn’t necessarily a tax break for leasing, but there is a sales tax savings with leasing.
“One of the advantages to leasing is that they charge the sales tax on each payment rather than the whole amount at once,” Boerman said.
Killian said that, with a $40,000 vehicle, the tax on a purchase is around $3,200, whereas the tax on a lease for the same vehicle would be around $1,200 to $1,500.
Another perk to leasing, the salespeople said, is the money that’s saved on maintenance for leased vehicles. Since a lease only lasts up to three years, most vehicles don’t need anything more than their regular oil changes and tire rotations. If the car does needs any other work done, the customer is responsible for that.
“Through the factory – and this is a purchase or a lease – you have two year, 24,000 miles maintenance free on your oil changes and tire rotations,” Delyser said. “And they have gap insurance on all leases, so if you total the vehicle, you’re fine. You walk away.”
Much like a cell phone contract, Killian said that a car lease also allows customers to have the latest technology available, without having to constantly trade in vehicles to purchase new ones.
“If you’re a tech savvy person, and you like to have the newest and greatest thing, leasing is great way to get a car because you drive it for two or three years – whatever your term is – and after that you get the next newest thing, with the latest technology and it’s still affordable,” Killian said.
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