Pro's and Con's of Leasing a New Car
- Usually, leasing allows you to drive a vehicle with a lower monthly payment than if you were to purchase it.
- Since you're always covered by the manufacturer's warranty, your maintenance and repair costs will be minimal.
- You're able to get a new car about every 3 years (36 month is the typical lease term).
- Most lease companies include GAP insurance in the lease payment, so if your vehicle is totaled or stolen, you won't have to worry about owing any money.
- In most states, the amount of sales tax you'll pay leasing a vehicle is much less than if you were to purchase it.
- At the end of the lease, you get to choose what happens next.
- If you love the vehicle and/or your payoff is less than the value of the vehicle, you can purchase or trade it in.
- If you don't really like the vehicle and/or want to get a different make/model and/or what you owe more than the value of the vehicle, you can drop it off at the dealership and pick out a new car.
- If you're in an accident, you don't have to worry about the value of your vehicle dropping because of the Carfax report. You always have the option to turn the vehicle in at the end of the lease.
- Most standard leases have a maximum mileage allowance of 15,000 miles per year. If you're driving more than that, leasing probably isn't for you.
- You could owe excess wear and tear charges at the end of the lease. Most dealerships do offer a policy that would pay these extra charges, but the policy increases your payment.
- You could owe excess mileage penalties (usually $.20-$.25 per mile) if your driving habits change during the lease.
- Most lease companies require a "100/300/50" auto insurance policy, so your auto insurance premiums may be more expensive.
- If you decide that you want to trade in your vehicle before the end of the lease, it can more costly than if you had purchased it. Typically, its not a great idea to trade-in or turn-in a lease until you're at least 6 months away from the end of the lease.
- You don't "own" the vehicle at the end of the lease (But really if you take a 60 month loan and trade it in at 36 months, you don't own it anyway).
- If your credit rating declines during the lease, you may have an issue getting another vehicle at the end of your lease.
- Because of the confusing and different terminology (ex. cap cost reduction), it can be easier for dealers and manufacturers to trick or confuse customers.
- If you turn in the vehicle at the end of the lease and don't lease another vehicle from that company, you'll be charged a disposition fee. Most dealers don't disclose the disposition fee. It is typically between $400-$500.
One of our pet peeves is "one size fits all" advice. If anyone tells you that you should always lease a car or that you should never lease a car, you should probably walk away from that person. There are way too many variables that could determine whether you should buy or lease your next car.
For a free consultation, contact us. We'd love to help.