If you’re on the hunt for a new car, you’ve likely discovered just how many considerations you have to make when you begin undertaking the process of purchasing a vehicle. One of the most important topics to discuss is whether or not you should choose to lease your car or buy it outright. Some may think that choosing to lease a car is similar in nature to choosing to rent a home instead of buying one. However, the same principles do not apply to investments like automobiles.
So, should you lease your car? Generally, leasing is not a good idea. But why is this? Let’s dive into some of the key reasons why you should (pretty much) never lease a car.
Chances are that you’ve come across a myriad of purported benefits that come with leasing a vehicle rather than diving right into car ownership. Of course, not all of these benefits should be discounted as there are some legitimate reasons as to why one might consider this. Some of the benefits often cited include:
- Leasing your car allows you to access lower payments than you would if you were to finance your vehicle.
- You don’t have to worry about the value of you car depreciating once you drive off the lot. Once your lease comes to an end, there’s no stressing about the trade-in value or how much you will be able to sell it for once you decide to purchase your next vehicle.
- Choosing to lease generally means avoiding a down-payment altogether or paying a very minimal down-payment.
- Avoiding any of the sales fees and other hidden fees associated with purchasing a vehicle.
- There’s less of a concern regarding whether or not the car will perform as anticipated as you’re generally driving a reliable model.
- Leasing means accessing car warranties that you may not have if you choose to purchase a car.
- Your lease agreement may include things like free oil changes or other perks that you would have to manage yourself with your own car.
- You may be able to lease certain vehicles that you wouldn’t otherwise be able to buy if you made the decision to purchase your car.
- If you plan on using your car for business purposes, you can write off your lease as a tax deduction to save when tax season rolls around.
With all of the amazing benefits listed above, it can be easy to see why leasing would be such an attractive offer to some drivers. But despite many of the benefits that you may hear about when you think about leasing, very few may discuss the downsides that accompany your choice to lease.
Once you understand why leasing isn’t the best way to have a vehicle, you’ll discover that many of the warning signs were right in front of you already. To better illustrate why buying is the better route, let’s take a look at some of the downsides of leasing.
But isn’t that exactly what you do when you decide to rent an apartment or a home? It’s true. As most people are familiar with, leasing never comes with the ability to attain ownership at the end of the lease agreement. For most people, renting a place is something that they have to do as homeownership is a massive responsibility and can cost a great deal of money in order to purchase a home.
So, doesn’t it stand to reason that leasing a car would be better than buying one outright? Well, not exactly. Although the price of cars is on the rise due to the national chip shortage and a greater demand for transportation, the truth is that cars still cost substantially less money than houses. Additionally, you’re going to be making monthly payments regardless of whether you decide to lease or get a loan for your vehicle.
Loan repayments may not cost you much more than the payments that you’ll have to pay when you lease your vehicle. This brings up the most important point. At the end of your lease, you’re not going to have a car. Once you finish off your loan repayments, you will. Because a car is such a vital investment and because it doesn’t cost nearly as much, it’s better to invest your money wisely and buy your car instead.
As with any lease agreement, it’s very important that you go over the terms and understand exactly what you have to do in order to avoid potential penalties or fees. Unfortunately, one of the biggest drawbacks of most car leases is that they have a certain mileage they expect you to stay within as you lease your vehicle. Generally, this limit is anywhere between 10,000 miles and 15,000 miles per year.
What happens if you go over your pre-determined mileage? For every mile that you add to your annual mileage, you can expect to pay anywhere from 10 cents to 50 cents per mile extra. If you’re someone who has had to travel frequently over the course of your lease agreement, you can expect to be paying substantially more out of pocket for these terms.
This brings us to another point: the condition of your car when it comes time to return it. Should your car have any damage or wear and tear that has reduced its overall functionality or appearance, you can expect to pay additional fees for this as well. Granted, most car owners care for their vehicles, but you still don’t want to have to pay extra for elements that may be entirely out of your control.
These types of additional leasing terms and expectations can often be what makes or breaks the leasing experience for many. If you don’t want to have to deal with paying extra when something comes up for you, it’s best to buy a car instead.
Car insurance is another expense that you have to factor into how much you’ll be paying overall for a car. Because leasing means lower monthly payments, some individuals may believe that this will offset their overall car insurance payments. But that’s not typically true when it comes to insuring a leased car.
Leased vehicles often require more coverage and greater premiums to keep the car protected against damage. This means paying for additional coverage rather than being able to get the bare minimum you would need as a driver. Although you’re still paying less for your leased vehicle, you’re paying more for your car insurance (on top of those additional costs that we mentioned in the previous section).
At a glance, it often appears that leasing is a more cost-effective way of obtaining a vehicle as it comes with far fewer financial responsibilities and demands. But once you start adding up higher car insurance premiums, hidden fees, and other items that can pertain strictly to leasing a vehicle, it rarely makes financial sense for anyone.
Renting is something that people rarely want to do. After all, who wouldn’t want to own a piece of property outright? Unfortunately, once you make the decision to lease, you won’t get much out of it. All of the fees included in your lease and car insurance can be costly, which prevents you from saving the money that you need to make a car purchase one day.
Where does this leave you? Often in a perpetual cycle of making car payments. Once one lease ends, you enter another lease and continue to pay without ever receiving the benefits of car ownership. Save yourself the trouble and save up enough money to buy your own car instead of making regular payments for years to come!
Leases are not easy to exit. So when you encounter something that makes you want to walk away from your lease, you have two options. Either you see the rest of the lease through or you pay the penalties that come with breaking the lease before it’s finished. Generally, these lease penalties and fees are also due all at once rather than paid over a specific period of time. As with leasing itself, trying to break one can be financially straining and is yet another reason why you should decide to buy instead of entering a lease that you may not be fully committed to.
Have you always dreamt of making alterations to your car to create the vehicle of your dreams? If so, that’s not going to happen with a leased vehicle. Leases will require you to maintain your vehicle to preserve its “showroom condition”. Beyond that, you can’t make any changes to the body of your vehicle as this will violate the terms of your agreement. Beyond that, certain changes may also result in higher insurance premiums that you would have to pay as well.
Put simply, leasing is rarely an idea that will help you save money over the long term. If you’ve considered leasing up to this point, the disadvantages listed above will demonstrate why making the decision to lease a vehicle is never better than making the decision to buy a vehicle.
Make no mistake, the process of buying a car can be just as lengthy and costly. However, despite some of the disadvantages of buying a car (depreciation, uncertain resale values, etc.), they often pale in comparison to the disadvantages of leasing a car. If you’re on the hunt for a new car, use the guide above as an incentive to save up and begin making payments toward an asset you will own rather than an asset that you won’t!