There’s a lot to consider when you’re on the market for a new vehicle. Once you’ve decided on the perfect make, model and color, you also have to find the best way to finance your new car. In order to determine if leasing is right for you, consider the following pros and cons:
You get more for your monthly payment - When you lease a vehicle rather than purchase one, the same monthly payment can typically get you a better vehicle. This is because when you lease a vehicle, your monthly payment only covers how much the vehicle’s value depreciates over the life of the lease, rather than the entire sale price.
“This is one of the biggest single attractions of car leasing for many people,” states Eric Peters from AOL Autos. “A car (or truck) that might cost you $500-$600 per month to buy might cost $100 per month less with car leasing.”
Save money on the down payment - Another of the most attractive features of a lease is the fact that leasing typically requires little to no down payment. Although choosing a small or nonexistent down payment when you sign your lease can set you up for higher monthly payments, it may still be the right choice for people who need a vehicle right away and don’t have the ability to wait to save up for a down payment.
Better warranty coverage - Three years is a typical lease term, and it’s also the duration of many new vehicle’s bumper-to-bumper warranty coverage. This means that if you lease, your car may be covered the entire time you drive it. Once the warranty runs out, you’ll be ready to lease a new vehicle, potentially saving you money on repairs that arise after the warranty period.
Newest technology - Leasing a new vehicle every few years means that your vehicle will never lack the latest technology. This makes leasing a great option for tech lovers and drivers who simply like to have the newest features in their vehicles.
Tax benefits - There are several tax advantages that come with leasing a vehicle. When leasing, you rid yourself of the upfront sales tax. Also, if you own a business and use the vehicle only for business purposes, you might be able to claim it as a tax deduction.
Limited mileage - One of the biggest drawbacks of leasing a vehicle is that the lease will specify a maximum number of miles that you can drive per year. For example, if your three-year lease has a yearly 12,000-mile limit, this means you have 36,000 total miles. At the end of your lease, if you have exceeded that limit, you will need to pay a fee for each mile over the limit. These fees can be substantial, so it’s important to consider how much you typically drive per year before leasing.
Potential fees for modifications or damage - Another disadvantage of leasing is that you likely won’t have full freedom to modify the vehicle without incurring a fee. This means you may not be able to install a better audio system or make other improvements. It can also mean that you could be charged a fee if you alter the appearance of the vehicle in a negative way, such as by harming the paint with a bumper sticker.
You won’t build equity - “Since you’re basically renting the car when you lease, you’re not building any equity,” states Liz Opsitnik from U.S. News. “This is similar to renting an apartment versus buying a condo or house.”
No end to the payments - When you lease a vehicle, you will need to make a payment every month. If you purchase your vehicle, however, you will be free from monthly payments once you pay off the full purchase price of the vehicle.
Higher credit scores may be required - “Another potential downside to leasing is that usually only shoppers with good credit scores will qualify for a car lease,” states Opsitnik. “If your credit score is less than perfect, you may want to consider buying a used car.”
If you’re not able to afford the big down payment and monthly payments associated with buying a new vehicle, but don’t want to deal with the downsides of leasing, purchasing a used vehicle with affordable financing may be your best bet.