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Leasing Eliminates The Uncertainty Of Your Car’s Future Value

July 6, 2017

When you buy a car, you can’t be sure what it will be worth at the time you want to sell or trade it. If you are the type of person that likes to have a new car every few years, this can cause major financial problems.

If your car is worth less than you thought it would be at trade-in time, you will have to pay more for your next car. Then if you stretch out the loan term to make the payments more affordable, you risk being “underwater” and owing more on the loan than your car is worth.

Cars Can Lose Value If No One Wants Them

Your car may also lose value because it is not in demand. Today, sedans are less popular than SUVs, so the value of used sedans will drop as well when they hit the used market. What are you supposed to do?

Leasing Is The Solution

Leasing eliminates all the uncertainties that are related to the value of your car several years down the road. There are two reasons why:

  1. Leasing Places A Value On The Car Up Front

When you lease a car, it has a residual value. This is a firm and fixed value of what it will be worth when you turn it in at the end of the lease, assuming you are within the mileage and there is no excess wear and tear on it. It is there in the lease agreement for everyone to see.

  1. The Value Of The Car At Lease End Is Not Your Problem Anyway

Because you are leasing, the residual value is not your problem – because you don’t own the car! The actual value of the car at this point may be more than the residual value, or it may be less. Either way, it will be counted either as a benefit or a loss to the leasing company. You are free and clear! Now you can open a new lease on a new car with no major debt from the previous transaction.

You may even be able to benefit in another way if the residual value of your leased car is significantly lower than the market price. You now have the opportunity to buy the car and resell it for a profit – that’s easy money!