Whether
or not a lease makes sense depends on your situation. There are
significant advantages to leasing. You can often get into a lease with a
lower down payment. You are only paying off the depreciation and a leasing
fee, so your monthly payments are also less.
When you reach the end of your
lease, you don't have to bother with selling it or trading it in. All you
have to do is return it to the dealership.
But, you have to be aware of the
drawbacks as well.
Leasing is a lot like renting your
home - you will never own it or build equity. If you continually lease,
you will never be without a car payment. Someone who buys a care and takes
good care will drive it for years after the payments stop.
Getting out of a lease early can be
very expensive, as there are steep penalties for early returns. And if you
go over your allotted amount of miles during the lease, you will have to
pay for the extra miles.
You may be able to get more car for
your money with a lease, but that isn't always true. The economy has made
leases more expensive, and loans are often relatively cheap.
There are other issues to consider. If you like
having the latest model of a car, then leasing will give you that. Few of
us are able to buy a new car every few years. You also have tax issues to
keep in mine. If you lease a car and use it for business
purposes, you can deduct depreciation as well as interest.
You may want to purchase a vehicle
if you are rough on cars. Leased cars must be returned in top shape. You
will pay extra fees if the car has more than normal wear. Insurance can be
tricky on a leased vehicle. If the vehicle is totaled or stolen, your
insurance may not cover what you owe. Gap coverage will cover any
potential shortfalls of your insurance.
If you have poor credit, it may be
more difficult to obtain a lease with reasonable terms. While credit will
affect you with buying also, you should expect problems while attempting
to negotiate a lease.
Leasing may appear very simple; you
set up the terms, length and schedule of payments. But, looks can be
deceiving. It is more confusing and mandates just as much negotiation as
purchasing a vehicle.
