It sounds simple enough but you'd like to understand the process better to see if this is for you.
Although the concept of leasing has been around for some time, it's relatively new to individual consumers wanting to drive a new car off the lot! The concept is growing in popularity and in fact, almost 20% of new car drivers lease vs buying outright or financing a car.
Of course there are pros and cons to leasing vs buying.
Below I'll discuss the plusses and minuses of each aspect! 1) Consider how many miles a year you drive.
Many leases are for 12,000 miles per year although some offer 10,000 or even 15,000.
If you drive more than this, than leasing is NOT for you.
It's simply not affordable to pay the extra mileage rate of 10-20cents/mile if you run over! If you always stay under these limits, leasing could very well be for you! 2) If you tend to want to make larger payments and the pay off the car and then drive it free and clear for a few more years without monthly payments then you might prefer to buy.
However, if you enjoy acquiring a new vehicle every few years, and you don't mind monthly payments, and then you might enjoy leasing.
3) When you lease, you only pay for the depreciation of the car over the period you drive it, so your monthly payments will be lower than if you buy a car and finance the full amount.
In leasing you don't need to put very much money down up front (sometimes none!) but when you buy, if you want to keep your monthly payments reasonable, you'll want to put much more down.
4) You may feel strongly about ownership of a car and having some equity in it.
Buying ensures that when the loan is paid off, you own the car outright and it's yours to trade, sell or give away at any time you choose! When you lease, it is a binding agreement and if you decide you don't want the car, it's prohibitively costly to break the agreement.
5) On the other hand, when you lease, you are usually driving a car that is always under warranty and because most leases are completely before the 4-year mark, generally there are many less repairs than a car that might be 4-6 years old when repairs, tires, brakes and other maintenance can begin to add up.
If you get nervous thinking about getting stranded, leasing something newer perhaps would be a better option.
6) Generally if you buy and hold onto a car long term, you will spend less money in the long term than if you lease every few years.
This is the nature of always driving something that is new and paying for that most expensive depreciation.
7) Maybe you are considering buying new and then trading ever 2-3 years.
This can be attractive but you'll be paying a lot more upfront and then probably NOT getting as much as you had hoped on your trade in.
In some ways leasing is cut and dry, drive for a period such as 3 yrs and give it back, get something new.
8) Some new owners are concerned about the condition of the car upon return.
Most lease agreements have a clause that allows "normal wear and tear" on the vehicles and it's important to find out what that means.
It's best to have anything more than very minor dings and scratches taken care of before returning the car so that you aren't hit with large fees.
9) If you buy OR you lease, you are required to insure your car.
Sometimes you may be required to carry full insurance by the leasing agent.
You are responsible for any accidents.
If you buy, you can continue driving with that bent fender but that must be taken care of before returning your car if you lease.
10) Leasing does require a very good credit rating so check your credit score online! Sometimes you'll need a slightly better score to lease than you would to get financing if you buy.
Carefully consider each of the above aspects and decide if leasing is for you! Leasing vs buying a car is very much worth considering! It's easy to see the popularity and ease of leasing but it's not for everyone.