Is car leasing making a comeback? While the majority of drivers choose to buy (or finance) a new car, many stand by leasing a car as the better decision. So which is correct? When should leasing be chosen instead of buying? Should you consider leasing? To help you decide, consider the benefits and disadvantages of leasing to help you decide.
Car leasing now accounts for approximately 30 percent of all new car sales, according to a recent report by U.S. News and World Report. Why is this? The high price of new cars and the evolving purchasing habits of the American consumer.
Little or no money down: leases require little or no money down and come with lower monthly payments
Trade up: Trade up for a new car and enjoy the most recent tech and safety advantages in newer vehicles.
Pay less each month than if you owned: That new car you want? With a leasing option, you will usually pay less monthly than if you were financing the same car.
Save on taxes: Consumers can typically save on taxes as well when they are leasing.
No hassle with selling your car in the future: Done with your lease? All you have to do is drop your car off at the dealership where your lease originated. Start a new lease or go another route; it’s up to you. When the lease term ends, you simply drop the car off at the dealership.
Warranty remains with leased car: Lease terms span about the same amount of time as the basic car warranty so you can better predict what it will cost you to lease the car. The great thing about an included warranty is that most cover basic maintenance costs as well.
While Americans are leasing more new vehicles than ever (and borrowing more than ever when they buy), there are many things to consider. While leasing a car sounds dreamy, it is important to factor in these disadvantages before signing the dotted line:
Annual mile limits: most leases have a mileage restriction on the leased vehicle to help keep the car in tip-top shape for the next leaser or eventual sale. Typically, mileage restrictions of approximately 9,000-15,000 are built into the contract. Exceed the mileage allotment and you will have to pay a fee. If you foresee that you will be doing quite a bit of driving annually, leasing might not be for you.
Wear and tear fees: Leased cars also come with wear and tear fees if the car is not kept in its nearly-new condition. You will also be required to show your receipts/records of regular maintenance that was done on the car to prove you took good care of it during the lease period. Again, if you fall short here, you will have to pay fees.
No equity in the car: Leases aren’t structured like financed car so at the end of your lease you won’t have any equity in the car you can use for a down payment on another car.
GAP insurance required: Leasing often requires that the lessor purchase GAP insurance so that the leasing company is covered if the car is totaled or stolen.
Buying a car gives you some flexible options that you won’t get from leasing a car, such as:
When your loan payments are paid off the car is yours: No matter how much you pay toward your leased car, you will never own it. With a financed car, you will reach a point where the only money you will putting down is for maintenance, fuel and repairs.
Drive as far as you want: Financed cars don’t have any mileage restrictions. While it is a good idea to keep your milage about 10,000 miles per year to not cause excessive damage on your car, and to keep it attractive to potential buyers if you sell it, you have no real limits on how far you want to drive.
No excessive wear fees: Financing a car doesn’t come with any standards for care so no future fees if you miss a scheduled tune-up. (Missing tune-ups will cause an accelerated break-down of your car’s overall health. Scott’s Fort Collins Auto can help you so that you never miss a tune-up!)
While not having many of the strings attached that car leasing has, car financing still has things to think about such as:
More of a hassle when you want a new car: Unlike with leased cars, you can’t easily trade-up a financed car. Getting a new car will require that you sell or trade in your current vehicle.
More expensive: In the short term, buying a car is more expensive. Most will have a car loan with interest fees and sales tax. Unless you are able to put down a sizeable down payment, typically, monthly payments are higher with financed cars than with leased cars.
Vehicle depreciation: Because market values fluctuate, when it comes time to sell or trade-up, you may find you owe more than the car is worth–in a position that no car buyer likes to face. When you lease, this issue isn’t your concern; the leasing company will have to worry about the depreciation.
Even after you think you’ve found the perfect new car, don’t sign on the dotted line until a mechanic takes a look under the hood. Scott’s is the perfect place to bring a vehicle for a pre-purchase car inspection. We perform all the mechanical, safety, and appearance checks you can’t complete yourself. With the results of the inspection in hand, you’ll know whether it’s advisable to go ahead with the purchase. If you have any questions for our team, or you want to schedule an appointment, please contact Scott’s today at 970-682-4202.