Leasing a car may not be on an older person’s top-of-mind, but it can be a better option than buying a new car for some. Older adults on fixed incomes who want to drive a new car with the latest safety features every couple of years or who want a shorter financial commitment to their car could benefit from leasing over buying.
6 benefits of leasing
There are several benefits that older people should consider when deciding if leasing a vehicle is the right choice for them.
1. Lower monthly payment
Leasing a vehicle typically requires a lower monthly payment and lower upfront costs than buying a vehicle. And the overall ownership costs throughout the lease are lower due to the car being under factory warranty. Essentially, all an older adult needs to think about with a leased car is the lease payment, gas costs and car insurance, which is pretty easy to budget for.
2. Option to buy
Regardless of if a car lease is secured directly from a dealer or an older person takes over a car lease for the remainder of the term, the driver will have the option to buy the car at the end of the lease for the amount stated on the lease contract. To make the decision to buy, the potential buyer should consider the leased car as if they are shopping for a used car. If it is priced similarly to other cars of the same make and model in the same condition and with similar mileage, it is a good financial choice.
Keep in mind: The costs of ownership will go up because the leased car won’t be under the same type of warranty, and the cost of repairs and regular maintenance will be the owner’s responsibility.
3. Tax deductions
Older adults who choose to lease a vehicle and who are still working part-time while in retirement may benefit from tax deductions. This information can be checked ahead of time through the Internal Revenue Service. By using the vehicle for work, older adults may save money on their monthly lease payment, cost of vehicle upkeep, the depreciation of the vehicle and in some scenarios even income tax. This tax deduction benefit is only available for drivers leasing a vehicle while in semi-retirement but is something to consider.
4. Latest models
A major benefit of leasing vehicles is the ability to get behind the wheel of the newest vehicles available on the market. The technology available in vehicles is constantly changing and ensures a much safer drive than the past. For older people, the added security of the newest features, like rearview cameras, parking assist and lane departure warnings, can be very valuable.
5. Vehicle warranty protection
A leased vehicle will have warranty protection on it. This covers any expected repairs that the vehicle will need. Although drivers will have to pay for minor repairs such as oil changes and tire rotations, this benefit saves a lot of time and money. The vehicle will be under warranty for the entire time you will be driving it, which means fewer trips to the body shop and more time for older adults to enjoy their retirement.
Since a lease is typically for three years or less and a car loan is usually for five years or more, leasing provides the flexibility some people may need if they think they will be driving less in the next couple of years. It is easier for a retiree to predict their driving needs just a couple of years into the future — but it might be more difficult to predict driving needs over five years, because those needs could change much more dramatically.
Tips for getting the best deal
To get the best deal on a car lease, drivers can negotiate the car price on their own, just as if they were buying, or use a service that offers pre-negotiated prices such as AAA (American Automobile Association), Costco, TrueCar or go through local banks.
Both options require a bit of planning ahead of time. Use Kelley Blue Book to better understand market pricing and whether you are getting the best deal. Negotiation is also key. The selling price for the lease can be negotiated too.
Negotiating the selling price is important because it is a key factor in calculating the car lease payment. Other major factors affecting the lease payment include the residual value of the car, the length of the lease, typically two to four years, and the mileage limits, usually 10,000 to 15,000 miles per year.
Bonus tip: Be careful to only obtain a lease that has a large enough mileage allowance to avoid excess mileage charges. Also aim to pay no more than $1,000 in fees associated with obtaining the lease, commonly called “drive-off” fees.
Another method of leasing a car is taking over the lease from someone looking to get out of their lease early. A lease takeover eliminates the need to negotiate the initial car lease and a down payment, since that already has been completed by the initial lessee. It’s just a matter of the new lessee finding a takeover deal on a car they want with an affordable monthly payment.
But it is important to pay close attention to the number of miles remaining and the length of time left on the lease to ensure that the lease will meet the needs of the driver. Services such as SwapALease assist new lessees with third-party inspections by mechanics to give lessees peace of mind.
The bottom line
Leasing a car instead of buying can be a great option for older drivers. Their driving needs can change more often than someone in their earlier years, so being able to obtain a different lease every few years can be beneficial. Calculate the cost using an auto lease calculator ahead of time to see if leasing fits your budget.