Pros and Cons of Leasing a New Car

The Pros & Cons of Leasing a New Car

 

Read below to discover more about the advantages and disadvantages of either decision.

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The Pros of Leasing

Leasing offers several advantages over buying, starting with a noticeably lower monthly payment. When you lease you can get a better, or just more expensive, vehicle on a smaller budget. Depending on what the dealer is offering at the time, you may be able to select from a higher up front down payment so you can have lower monthly payments or a smaller down payment with higher monthly payments. For example, someone that doesn't have a lot saved up, but can afford larger monthly payments would benefit from the lower down payment method, whereas someone who has a lot in savings, but not as much money coming in, would benefit from the smaller monthly payments.

The length of the lease also sets a finite duration that you will own the vehicle. If you're the kind of person that wants a new vehicle every three years, leasing offers some appealing perks. You'll always have a car that's less than three years old so it'll come equipped with the latest and greatest technology and safety features. You also will not be taking a risk on the depreciated value of the vehicle at the end of the three year lease period. When you first take out a lease, the dealership will determine a purchase value that you can opt to pay at the end of the lease period to claim ownership if the vehicle. If the vehicle ends up losing a substantial amount of value, you can opt to pass on buying the vehicle for the pre-determined cost and avoid having something that won't be worth as much as you want if you sell it. You also are protected from trade-in values at the end of the lease. If you own the car and plan to sell it after three years, the most money you can get is what a dealer or independent buy will offer you which may end up being less than the Kelley Blue Book value of the vehicle. Leasing a vehicle also means you don't have to deal with the unreliability and repairs associated with an aging vehicle. A typical three year lease includes a bumper-to-bumper warranty so you won't be stuck with major repair bills if something breaks. Repairs are usually covered in leases. Additionally, you won't have to worry about expensive maintenance costs because you won't own the vehicle long enough for expensive parts to wear down and need replacing.

The Cons of Leasing

On the downside, when you lease a vehicle you're not building any equity: you're essentially paying the interest to finance a loan and pay off the value depreciation. It's like a really long rental period instead of owning the vehicle. So when the lease is up, you don't actually own anything and will have to start from scratch with your next vehicle purchase. While repairs are usually covered, maintenance is not so you'll have to pay for oil changes, tire rotations, brake pads, tire replacement, and all other recommended maintenance from the manufacturer. If you don't keep up on maintenance you can end up owing a fee at the end of the lease, so you lose the ability to opt out of services that may not be necessary. You may also have a more difficult time leasing a vehicle if you have a bad credit score.

Mileage restrictions can be a problem, especially if you change your work commute to put on thousands more miles every year. Leases typically allow for 9,000, 12,000, and 15,000 miles a year; you'll be charged for each mile over the limit. Additionally, you most likely won't be able to make major, irreversible alterations to the vehicle, so leasing probably isn't for you if modifications and upgrades are your thing. It also costs more to insure a leased vehicle than a financed one, so you can expect to pay an extra $150 on insurance. If you decide you want out of the lease early, you'll likely be forced to pay a hefty termination fee as well, so if you really don't like the car you may end up stuck with it. Leasing also doesn't play well with people who have pets and children, as you're on the hook for repairing wear-and-tear including minor spills, stains, and scratches.

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