Why You Should Never Lease A Car – The Pros & Cons
Everyone wants a new car. Right? Nothing like that new car smell until you snap out of it and have to pay that note and insurance. Today, vehicles are not only astronomically expensive, they are way, way overpriced. For example, I paid $55K for my Tahoe LTZ, a particular order with all the bells-n-whistles. If I had to replace it today, it would cost me over $80K.
Now that's insane! So, I get why some people lease cars. Sometimes, you get stuck between a rock and a hard place and have enough money to pay a note, but not enough to buy a vehicle outright. Or do you? Leasing a car is an option, but according to the folks at supermoney.com, it's not always a good one.
Leasing a car means you drive it for some time, per the lease terms, then give it back. Buying a car will pay off over time. The longer you keep a vehicle after it's paid for, the more value you get from the purchase.
Consumer Reports points out there are pros and cons to leasing a vehicle. Below, we will point them out. First, Here Are 10 Reasons Not To Lease A Car
1.) It's Not Cheaper Than Buying A Car - Monthly payments never end. In contrast, the longer you keep a vehicle once it's paid off, the more value you get out of it over the long term. It's cheaper to buy a car and keep it until repairs are no longer affordable.
2.) Car Insurance Premiums Are Higher - Insurance requirements are going to be higher because the leasing company owns the car and they want to make sure it has maximum coverage to protect their investment. When you finance a car to buy, you will have to acquire insurance, but the baseline coverage needs won't be as high.
3.) There Is A Mileage Limit - Most Lease contracts specify a mile limit. If you go over it, you’ll be charged a mileage penalty ranging from 10 to as much as 50 cents for each additional mile. Sorry, you don’t get a credit for unused miles.
4.) Buy Gap Coverage - This will help cover costs if you are involved in an accident or if the vehicle is totaled. Otherwise, you will still be required to make your lease payments through the end of the contract.
5.) You Are Responsible For Maintenance costs - Less normal wear, the vehicle must be returned in the same condition as it was at the time it was leased. If not, excess wear is going to be very expensive. You assume all risks associated with maintenance and repairs.
6.) No Customization - The vehicle must be returned as it left—no upgrades, window tint, car magnets, bumper stickers, etc.
7.) The Shortest Lease Is 24 Months Or Less - After all those payments you don't own the car at the end of the lease. More times than not, you will have paid more than than if you had bought a car. If you want to purchase a car, you don't even have a trade-in
.8.) You Pay More Interest On A Lease - Shop around to get the best dealer price. When you lease a vehicle the payment and tax deduction will be higher. That is because you can get the full return on the principal.
9.) The Dealer Buyout Will Be Inflated - Buyout clauses on leases will not be in your favor. They are determined by the mathematics of amortization. If they project the vehicle's worth will $17,000 at the end of the lease, they aren't going to lose money and set the buyout price at $12,000. More times than not, they are going to set the price above the outstanding principal balance.
10.) You Walk Away Empty Handed - At the end of your lease, you will be lucky to leave without having to pay any fees. Once the vehicle has been returned, after all those payments you with nothing. Unless you turn around and start a new lease and get another vehicle.
Those were the "Cons" and honestly, leasing a car has its advantages. However, if you are considering this, do your homework and make sure this is the right move for you financially. At the end of the day, there’s no definitive right or wrong answer for whether you should lease or buy a car.
It really depends on a few factors your lifestyle, finances, and personal preference. For example, you may be in another country and only need a car for a few months to get around for work. That's a pro! Other pros for leasing a vehicle are as follows:
1.) Less Money Up Front - Leases typically require little to no down payments, when a vehicle purchase can run up to 20%. Usually, you would pay the tax, title, registration, and first month's lease payment. This is usually cheaper than what you'd pay for the down on a car for purchase.
2.) Lower Repair Costs - Leases can be less than 24 months. The manufacturer will sometimes take care of the bumper-to-bumper warranty or maintenance costs. Look at your lease agreement and try to negotiate those costs if it's not included. Just make sure to understand the policies to avoid extra fees.
3. You Can Drive A New Car Every few years hassle-free
Car leases usually last between 24 and 48 months. Because lease terms are relatively short, you can drive a new car with the latest technology and safety standards without the commitment or hassle of trying to purchase or sell your current one when it’s time to upgrade.
4. You Have A Lot Of Choices - A lot of times people will lease their dream car they can afford to buy.
To learn more about leasing a car, HERE.