There’s a good and a bad side to everything. The same principle applies while leasing a car as well. The concept is getting popular in Malaysia lately with many young professional going for leasing a car than purchasing it. If you are contemplating to lease a car, It is necessary for you to look at both sides of the coin before deciding.
Why Should You Lease a Car?
Lease Payments are Lower than Car Loan Instalments
You can choose to lease over buying as the lease payments are lower than the actual car loan instalments. If the interest rate is lower for lease than on a car loan, then it is wise to go for leasing.
Lease Offers Can Save You More
Similar to bank promotions, if you can manage to get a good deal from the lessor, it is always profitable to go for lease over purchase. Say, you can get a discount on the interest rate or monthly payable instalment amount. If you can get a car in good condition at a low price, you shouldn’t miss the opportunity.
A car lease contract usually lasts for 3-5 years. Every time a lease contract gets over, you can choose another brand new car to drive. Leasing suits those who are crazy about driving all the new cars available in the market. It wouldn’t be a nice idea to sell your car for another new car in the market as the resale value of your current car would have depreciated.
If You Need a Car for a Short Period
Need a car on a short-term basis? Lease it than buying a brand new one; it will help you save more. It doesn’t make cognizable sense to purchase a car and pay the loan instalments for the next 2 years when your stay in Malaysia is for a short period of time. Also, a car’s price depreciates over time. So, when you leave and sell your car to another party, chances are that the selling price might not even cover the car loan amount. On the contrary, it is a simpler deal to just take a car for lease, use it until you are in Malaysia, and then return it.
Warranty Never Expires
A purchased car comes with a limited number of warranty years. But in the case of leasing, the car comes with a warranty for the entire lease period on papers. So, you don’t have to worry about repairs and finding original spare parts for your car. If there is some issue, you can just drop the car at the lessor’s disposal and get everything fixed without spending from your pocket.
No Hassles of Selling the Car
You don’t have to go through the hassles of selling your car if you lease one. You must know that a car is a depreciating asset and loses its value as the days pass. Instead of waiting for a person who buys your car, making negotiations about the price, and transferring ownership to the buyer, you can keep things simpler with a lease arrangement. Just return the car to the dealer when you no more need it.
Low Upfront Payment
Based on the dealer you choose to rent the car, you have to make a minimal to no down payment. You don’t have to save a large chunk of money to make down payment as in the case of purchasing a car. Leasing lets you use the saved funds for something more important.
The Other Side of Leasing a Car
Credit Score Matters
You need to have a top-tier score with a minimum of 660 to get a decent interest rate. Similar to getting a car loan to buy a car, leasing also requires you to maintain a good credit history.
Extra Penalties and Fees
The car lender specifies an allowed mileage per year when giving you the car on lease. Be mindful, if you exceed the specified mileage limit for any reason, you are supposed to pay a penalty. Any damage caused to the car, major or minor, will cost you extra ringgits. Though you will not be taking care of the entire repair cost, you will still be paying something more than the just the rental cost.
You Don’t Own the Car
When the lease period ends, the car is not yours anymore. Based on the residual value of the car, you can still choose to buy the car. In case you can’t afford to make the residual payment, then you have to give up on the car and look for another one.
High Insurance Excess
A policy excess will be applied to your car insurance. The excess includes the maximum amount possible for certain claims you would be paying from your pocket. Rest of the expenses in case of claims will be paid by the insurer. It is considerably low when you own a car than when you lease it. You may have to pay a minimum of RM1,000 for the “excess” charges.
You cannot keep a brand new car model in mind and wish to get it for lease. In another case, if you lease it from a dealer, you will not have options from different manufacturers. You will have to check out the available car models and collect information about its age, mileage, and other related things before picking on a car.
Check all the pros and cons of leasing, use your logic based on your requirements and decide. If you are still sticking on to leasing a car, here you go with an interesting bit of information. Volvo cars are now available on lease programme where the monthly lease payment starts at RM2,692 inclusive of road tax, comprehensive insurance coverage, and maintenance cost.
You can also get petrol vouchers if you subscribe for the programme within the promotion period. Another good news is that renting/leasing a car will not be reflected in your credit report. So, think about it!