Leasing a car has good points and bad points

While most consumers would be better off purchasing a vehicle rather than leasing one, there are situations where a lease might suit you better than an outright purchase. We will examine the pros and cons of leasing a car so that you might decide for yourself which option best suits your needs.

More below.

Leasing can be good or bad, depending on your needs

In a previous article about leasing cars, we discussed how leases work in general and what you need to know about becoming a lessor. The terms used are different from those used in car sales, but the process is otherwise quite similar. You work out your best deal on price with the salesperson and then discuss the finances. The biggest difference, of course, is that you don’t actually own a car when you are done. You return it to the leasing company.

There are some good points and bad points to leasing; you should look them over in order to decide whether or not you would be a good candidate.

Advantages

• Lower payments - Payments for a leased car are generally lower than for a purchased car. You are only paying for the value of the car for the duration of the lease, and not for the life of the car. Due to the lower payments, you can often drive a more expensive car than if you had purchased one.
• Upfront costs - The out of pocket expenses can be lower for leasing than for purchasing. Upfront costs generally include the first month’s payment, tax, title, registration and a possible capital reduction fee. The capital reduction will reduce the cost of the vehicle and lower your payments.
• Getting rid of the car - At the end of the lease, you simply give the car back. You don’t have to sell it, trade it in or do anything else with it. For a lot of drivers, this may be a huge convenience.

Disadvantages

• You don’t actually own a car - You pay every month, but when the contract runs out, you have to give the vehicle back. You have nothing real for your money paid.
• Early termination - The cost of terminating a lease early can be huge; some agreements require that you pay the full remaining amount of the contract. This can be true even if you aren’t terminating the lease by choice, as might happen if the car is wrecked or stolen. 
• Insurance - Auto insurance costs are generally higher than for purchased cars, and the minimum amount of insurance required tends to be higher, as well. Plus, you will want to inquire about “gap” insurance in case the car is wrecked; it could be worth less than the amount owed on it and you would have to pay the difference.
• Mileage fees - The cost of a lease could go way up if you drive more than the allowed number of miles permitted in the agreement. The fee can run as high as twenty five cents per mile and that can add up in a hurry.
• Wear and tear - If there is any damage to the vehicle beyond what is considered normal wear and tear, you will have to pay for it.

For some people, leasing is perfect. For others, buying is the only way that makes sense. Be sure to determine which is best for you before you sign any agreement.

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