Answer:
Buying a car on a lease means that you take the purchase price, and calculate the monthly fee it takes to pay it off over a period of five years. The instalments you pay will include a portion of the capital and interest.

The main reason you would lease a car is to make the most of the tax benefits because you can claim the payment back from Sars provided that you use the car for the production of your income. You are also not required to pay a deposit, however if you have a shaky credit record, the bank may ask you for one.

A residual lease is where you can take a portion of the purchase price and defer payment to the end of the lease period. For example, say a car costs R200 000 and the bank agrees on a 50 percent residual, you pay monthly instalments on only R100 000.

Refinancing your car?

This may significantly reduce your instalments, but you will have to pay the interest portion of the residual amount. At the end of the period you will have to come up with the other R100 000 to settle the lease.

This is usually achieved by selling the vehicle or you may be permitted to refinance it. Although in the short term you get a break from high repayments, the interest is much higher on this kind of lease.

A regular instalment sale requires you to put down a deposit of 10 percent to 20 percent. You can depreciate the value of the vehicle by 20 percent per year but you cannot claim the repayments against your tax.

The only real benefit in terms of the laws being relaxed on leasing is that the individual will not be required to pay a deposit. This is not a real benefit in any event as the more you finance, the more interest you will pay. You will not be allowed to deduct the payments from tax if you are not using the car for income production or are self employed.