One decision you have to make when the time comes for selecting a new car is whether you are going to buy or lease. There isn’t a “right” or “wrong” answer in this choice as much as it is a case of personal preference and it all comes down to your lifestyle preferences and finances. If you have no problem driving an older model car and then every few years exchanging it for a newer model, then leasing is definitely the choice for you. However, if you are planning to drive the same car for five years or more, buying would be the smarter choice.
Thanks to the economy being on a slippery slope, auto sales have been at their worst in over 20 years. To try and combat this issue, car dealerships have been pushing leasing over buying, which in the end has led to more cars leaving the show room (1 out of 4 to be exact). The upside to leasing is you actually get a lower monthly payment as opposed to buying. Most dealers encourage leasing due to the lower payments and this is a way for those who are financially strapped to enjoy a new car. Now there are a few things you should be aware of when it comes to leasing:
- The initial cost can be higher as this includes a down payment, security deposit, first month payment as well as licensing fees. Many dealers will agree to lower this sum however it will raise your monthly payment.
- Be aware that most of the low monthly payments advertised due not include taxes which can easily increase you payment by $120 ($10 per month).
- A lease can actually punish you for going over in mileage. In most lease agreements there will be a specified time frame as well as the number of miles the car can be driven each year. Most lease agreements it averages to 12,000 miles or less. If you go over this amount the fees equal out to be $.15 per mile which can add up FAST.
- Most leasing companies require you to carry a low-deductible auto insurance which can end up being very expensive per month. So you want to make sure to read the fine print.
So what happens after your lease expires? With most closed-end leases you can turn your can and keys to the dealer and they inspect the vehicle for damages and charge you for what has not been repaired. You then pay a fee so they can find someone to buy the used car and you can find a new car to lease for yourself if you choose to go that route.