Leasing a Vehicle – Benefits
Leasing a car is just like financing the purchase of the automobile in numerous ways, but there are some key differences. You could beable to get more car for less money by leasing. That’s just because a auto loan is reliant on the entire cost of a new car, while a lease is dependent on merely a % of the car’s price. For example, on a $30,000 car, you’d finance the entire $30,000 purchase cost with a car loan. Using a car lease, you only pay the actual difference between the car’s price and what it’s expected to be worth at the end of the lease, which is a car’s residual value. So if the car’s residual value is 55 % after 3 years, for example, it means the $30,000 car could be worth $16,500 at the end of the lease. You’d make lease payments for the remaining $13,500 and never the entire $30,000.
If you only have a tiny deposit saved, leasing may also be a better deal. Many car leases require from about $0 to thousands of dollars in advance, though the deposit is negotiable. Many advertised lease offers will promote low payments, but require a sizeable down payment. If you want to put as little down as possible, remember that your monthly lease payments are going to be higher.
Many leases last 3 years, which is typically the duration of many new-car bumper-to-bumper warranties. That means the vehicle is usually covered under warranty for repairs for the period of the lease. You still need to preserve the car, though, this includes oil changes, tire rotations and recommended maintenance from the manufacturer. Failure to correctly take care of the car during the lease could lead to fees when you turn the vehicle in at the end of the lease.
If you enjoy having the newest high-tech features, leasing could be the more sensible choice for you. Since you’d be leasing every few years, each new car you lease will have the latest technology and safety measures. With the leased car, you don’t need to worry about selling the car or getting a good price for your trade-in. When the lease is over, you can simply return the vehicle and walk away.
Leasing a Vehicle – Drawbacks
Lease contracts limit the amount of miles you can drive. These mileage restrictions typically are 9,000, 12,000 and 15,000 miles a year. You will need to estimate the amount of miles you drive per year so you can figure out how many miles to purchase. If you go over that amount, you’ll pay fees per mile at the end of the lease once you turn the car in. These overage charges can be very expensive.
With leasing, you can sometimes make minor alterations towards the vehicle that can be reversed before you turning the car back in, but you generally can’t make any major alterations. Be sure you review the lease contract carefully before signing.
Another drawback is that if you lease, you’re really just renting the car for a couple of years and paying interest to finance that car for a specified duration of time. Since you’re basically renting the car when you lease, you’re not building any equity. That means that when the lease ends, you either get a new car, with new payments, or take out a loan to buy the car you were leasing.
Another potential downside to leasing is the fact that usually only shoppers with higher credit scores will be eligible for a car lease. If your credit score is not very good, you may want to consider waiting to lease until you can increase your credit score.
Now that you understand the Benefits and Drawbacks of a Lease, would you opt to buy a new car or just lease one?