Pros and Cons of Leasing a Brand New Vehicle
Are you on the market for a brand new car? Have you ever considered leasing instead of buying? Depending on your specific situation, leasing can be a very attractive alternative to an auto loan. However, it is crucial that you understand everything involved in a leasing contract and that you review the advantages and disadvantages of this type of lending before making a final decision. Below is a closer look at the pros and cons or leasing to help you make an inform decision.
What is Auto Leasing?
With auto leasing, you do not actually purchase the vehicle you want. Rather, you make monthly payments to cover your use of the vehicle. Since, you will not be purchasing the vehicle; you will not be required to pay the entire price of the car. Instead, your payments will technically cover the depreciation value of the vehicle, in addition to interest.
Most lease agreements last for a period of two to five years, where you will retain possession of the vehicle throughout the duration of the contract. At the end of the contract, you can choose to purchase the vehicle for an agreed upon price, extend the lease, or return the car and either purchase or lease a new car.
Advantages of Auto Leasing
- Leasing payments are typically always lower than loan payments.
- You don t have to worry about selling your car when you are ready to get a new vehicle.
- Since you are leasing a brand new vehicle, it will have less mechanical issues. In addition, you vehicle will likely be covered under a bumper-to-bumper manufacture warranty for the duration of your leasing contract.
- You have the option of exchanging your current car with a brand new car every three to five years.
- In most cases, you will have a lower down payment requirement when leasing.
- A lease gives you the opportunity to use the car for several years before deciding if you want to buy it or not.
Disadvantages of Auto Leasing
- Leasing is just like renting, which means that you will not have ownership of the car. However, you will have the option to purchase the vehicle at the end of your lease.
- You may have additional penalty fees for driving more than the set mileage allowance, which is usually 15,000 miles a year. You may also be responsible for any damage caused to the exterior and/or interior of the vehicle or for not maintaining proper upkeep of the car.
- If you choose to purchase the car at the end of the lease, you will likely spend more money overall than if you purchased it from the beginning.
- Some dealerships and leasing agencies will only lease to customers with good credit scores.
If after careful consideration, you have decided that leasing a vehicle is the best option for you, start by shopping around. Many people erroneously think that negotiating is only useful when purchasing a car. This could not be further from the truth. Be sure to shop around to find out what deals other local dealerships are offering, this will give you some leverage when negotiating.
The most important thing is to read the leasing contract completely before signing anything. You want to pay close attention to what your responsibilities are under the contract, and what types of penalties fees are included with the lease. Understanding these details before you start your contract may be able to save you a lot of money in the end.