They say the only things that are certain in life are death and taxes. But if you could add a third item to the list, the depreciation of a new car would be a strong contender.
In fact, even if you purchased a new sports car with the greatest amount of torque, the dizzying speed with which that car will depreciate, especially in the first year, will easily eclipse any roadway contest.
Vehicle depreciation makes car leasing a smart choice. And this choice becomes even more attractive when you add up the other benefits that car leasing offers. Yes, you will forsake that “new car euphoria” that motivates many people to buy a new vehicle. But the cost savings you will derive from car leasing may leave even that heady feeling in your rear-view mirror – for good.
New vehicles depreciate rapidly in the first year
If you’ve heard that the value of a new car starts to plummet “the minute” it’s driven off the lot, you’ve heard correctly. Research by Edmunds shows that the first year is “the most devastating for most new cars.”
To make its point, Edmunds used an “average” midsize sedan with a sticker price of nearly $28,000. The first year, the sedan lost about $7,400 in value; over the course of the next three years, it lost nearly $6,000.
Naturally, depreciation varies depending on the make and model of a vehicle. But financial experts say a vehicle’s drop in value “typically is between 15 and 35 percent in the first year and up to 50 percent or more over three years.”
Spare the sweat that comes with “sweat equity”
By eliminating the premise of ownership, leasing eliminates this mathematical decline. In other words, leasing allows you to sidestep the entire issue of building “ownership equity,” which normally takes most new car buyers many years to achieve.
In more tangible terms, the money you stand to lose in the first four critical years of a vehicle’s life – the sum total of the depreciation in that time period – could be put to other use. But this assumes that if you wanted to purchase an “average” mid-sized sedan, you could find a way to spend $13,000 on something else in your life.
Leasing pays off in other ways, too
Beating the depreciation curve is a huge advantage of car leasing, but others include:
- Leasing often requires no down payment – or, if one is required to get a particularly good or timely deal, it usually is low in comparison to the down payment required to make a car purchase.
- Leasing often requires a lower monthly payment. This is another pivot point at which depreciation plays a role since lessees pay only for the depreciation on a vehicle – not for the entire vehicle. This is another way of say they’re paying to rent the vehicle for the term of the lease.
- Leasing can free you to drive a vehicle you might not otherwise have afforded. Since monthly lease payments can be between 30 and 60 percent lower than loan payments, many people apply some of the ownership equity “savings” to getting a higher priced or better equipped vehicle.
- Leasing frees you of maintenance worries since the manufacturer’s warranty should cover any necessary repairs during the lease term.
- Leasing allows you to “trade up” to a newer vehicle at the end of your lease term.
For some of the best car leasing deals in the state of Nevada, come to Valley Automall. In addition to death, taxes and new-car depreciation, we’ll show you that another certainty in life is the unparalleled customer service you’ll enjoy the minute you step through our door.