Car leasing is a popular auto financing option that allows you to “rent” a car from a dealership for a set period and number of miles instead of having to buy it. You typically make monthly lease payments and in return, the dealer allows you to keep driving the car. At the end of the lease depending on the contract you can either return the vehicle or buy it out and keep the car.
Pros of leasing a car
Leasing is cheaper for a variety of reasons including you don’t own the car at the end. Because you don’t own the vehicle, you don’t have the responsibilities associated with ownership. The monthly payments are lower than those of purchasing vehicles. The down payment is also low compared to buying a new car which is a big financial commitment. The lower cost of leasing often allows drivers to pick cars that would ordinarily outside be their price range.
One feature of lease agreements is routine maintenance courtesy of the dealership. This means maintenance expenses like oil changes, tire rotations, repairs, and inspections are all paid for. You can rest easy knowing everything you need when it comes to vehicle performance and maintenance is covered.
Leasing lets you upgrade your car every two to four years making it a better choice than buying for people who do not keep cars for long. It allows you to consistently drive newer models of your preferred brand every few years.
Avoid problems with depreciation
Depreciation is a huge concern when it comes to buying cars. A car will lose about 60% of its total value within the first four years. Leasing frees you from this worry.
You get to drive the car during its best years.
You don’t have to make a lifetime commitment. As soon as your lease is up you can move on either to another car or none at all.
Cons of leasing cars
No financial benefits
Purchasing a car comes with some financial benefits even though cars depreciate in value over time. For example, you can’t get a return on investment or some much-needed cash by selling the car because you don’t own it. At the end of the contract, you have nothing to show, you get nothing back unless you count the memory of driving the car for a few years.
Restrictions on usage
There are certain restrictions you have to abide by such as a limit on how far you can drive leased vehicles before having to pay some fees. For example, the mileage allowed could be between 10,000 and 15,000 miles (16,000 – 24,000 km) after which you pay a certain fixed amount per mile above that. You can also find yourself paying extra for any wear and tear that is deemed excessive. Standard wear and tear are handled by the dealership but anything they consider excess could be paid out of pocket.
Tied to a financial commitment
Leasing means you are tied into a financial commitment for the next two to five years depending on the contract. There’s also the problem of difficulty getting out of the deal. If your financial situation changes and you need to cut your monthly payments or get out of the lease entirely you may find it incredibly difficult or impossible. Early termination fees can be prohibitively high.
Buying is a better choice if you’d like to customize your car, can afford higher upfront costs and you want to drive long distances without worrying about some contractual agreement. Leasing is a better choice when you’re trying to keep your monthly payment low, hate dealing with maintenance and repair issues and would prefer to drive a new car every few years.