What are the pros and cons of buying a car through a lease?

Question

I have always wondered what would be the benefits of paying to drive a car and then having to turn it back in when the lease was up.

Answer 1

Estimates hold that as many as nine out of every 10 Americans don't have sufficient cash to buy a car outright. Couple that with skyrocketing car costs, and it's small wonder that an increasing number of prospective buyers are opting to lease rather than own.

In essence, leasing means you're renting a car instead of simply buying one. Although you may choose to buy the car at the end of the lease, you generally return the car to the dealership or leasing company -- the money you paid during the period of the lease reimburses the leasing agent for the depreciating value of the car, plus a profit to make the whole arrangement worthwhile to the company offering the lease.

Significant advantages to leasing: you can often get into a lease deal with a lower down payment than that mandated by many purchase plans. And, since you're only paying off the depreciation on the car's value (plus a fee to the leasing agent), your month-to-month payments may also be less than buying the car. Finally, the end of the deal is generally a snap -- rather than having to hassle to sell a car or trade it in on a new one, you simply bring it back to the dealership or leasing agency.

Leasing, however, has significant drawbacks. The first is akin to the advantages of owning a home rather than simply renting it -- since you're really renting a car with a lease, you're merely laying down cash to keep you behind the wheel for another 30 days. In other words, you're building no equity. You'll never be without a car payment, while someone who buys a car and takes care of it can enjoy several years of driving without having to fork over any dough. Moreover, getting out of a lease prior to its designated termination date can be prohibitively expensive, as many leases levy steep penalties for early returns. Finally, leases commonly charge you extra if you drive more than the number of miles specified in the lease.

While you can usually get more car with a lease than you can with the same payment on a purchase, that's less true than it used to be. Due to market forces and the overall economy, leases are relatively more expensive than they were a few years ago, while loans are relatively cheap. Some automakers even offer zero-percent loans. Click here to check out the latest auto loan rates.

There are other issues to bear in mind. If having a new car every so often is of value to you, then it's hard to argue against leasing (after all, few of us have the financial resources to plunk down cash to buy a new car every few years or so). Additionally, there are tax considerations. If you lease a car and then use it for business purposes, you can deduct depreciation as well as interest on the lease (something you cannot do with a conventional purchase arrangement).

Here's a checklist of additional elements to consider when choosing whether to lease or buy:

If you tend to be rough on cars, you may do well with buying. Leasing agencies expect their cars to be returned to them in top-notch shape -- anything beyond an expected amount of wear may mean additional penalties for you.


Insurance can be a bit trickier with a leased vehicle. If you destroy the car or it's stolen, there's always the chance that your insurance coverage may not cover all that you still owe to the leasing agency. To protect against this, be sure to obtain gap coverage to address any potential shortfalls in your coverage.


Poor credit may also make it more difficult to get a lease or, at the very least, arrange for one with reasonable terms. Granted, bad credit affects you no matter if you're buying or leasing, but it's particularly problematic when you're shopping for and attempting to negotiate a solid lease plan.


On the surface, leasing may appear to be a rather straightforward proposition: Just set up the terms of the lease, length and a schedule of payments and that's it. In many ways it can be as confusing and mandate just as much negotiation as the most complex purchase arrangement. Even the most general overview of what you need to pay attention to in negotiating a lease would require a completely separate article.

Most info from Bankrate.com

Answer 2

I am in the third year of my 3 year lease. I drive a BMW X3. It was the first time I've ever leased as I'd always been scared to do it before.

Well, I am really happy to say that it has been a really good experience so far. They pay for regular maintenance and oil changes. If there is ever a problem with the car at all, I just drive it right in to the Dealer and they give me a loaner car until my own is done. Also, if you are incorporated or use it for business, you can use it as a tax advantage.

The downside is yes, you are in essence "renting" the car. However, even when you buy a car, you still lose so much when you sell it. They lose so much of thier value right when you drive them off the lot. Also, make sure if you lease, that you buy enough mileage per year. many people get into trouble by going over thier mileage. Most plans just give you 12k per year. Well, I don't know about you, but I definitely need more than that!

So far so good, is all I have to say. I'm sure there will be pros and cons to both, but for me, it works great! Good luck!

Answer 3

I guess i disagree with almost every answer on here. There are many pros to a lease. Payments are lower, you dont have to worry about reselling it, if you make leasing cars a habit, you will have a new car every 2-3 years, and the best part about it, all the maintenance is paid for. Need an oil change, take it to the dealer, its free! Sure theres an argument to be made about buying a car, but when you buy a car, and you dont like it in 3 years, the value has fallen so fast, you might not be able to sell that car for anything. You spend $40,000 on a car, you drive it off the lot, the value has already fallen $5-10,000. Its the same about buying a home, or renting. You rent it, you pay nothing for maintenance, you need a new roof, you dont pay for it, however, you buy a home, your stuck with that home until you pay it off. You want to move, how long will that home be on the deflated market until you sell it, and what are your chances of selling it for even close to your asking price? LEASE LEASE LEASE

Answer 4

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RE What are the pros and cons of buying a car through a lease?

I have always wondered what would be the benefits of paying to drive a car and then having to turn it back in when the lease was up.

Answer 5

A lease is like a long-term rental, but with more fees and responsibilities involved.

Cons: milage limit, higher insurance rates, you don't own it at the end unless you buy it (and there is no depreciation taken off the purchase price at the end of the lease), always issue that cost when turning it. If you get in an accident, get ready for a headache without proper coverage. Fees and costs is usually the same as a car loan at 12-14% interest

Pros: More car than you can otherwise afford & the ability to write off the cost of your taxes if you own a business.

Answer 6

Leasing a vehicle
Pros

• You can often get into a lease deal with a lower down payment than that mandated by many purchase plans.
• Since you're only paying off the depreciation on the car's value (plus a fee to the leasing agent), your monthly payments may also be less than buying the car.
• The end of the deal is generally a snap. Rather than having to hassle to sell a car or trade it in on a new one, you simply bring it back to the dealership or leasing agency.

Cons
• The first is akin to the advantages of owning a home rather than simply renting it -- you're building no equity.
• You'll never be without a car payment, while someone who buys a car and takes care of it can enjoy several years of driving without having to fork over any dough.
• Getting out of a lease prior to its designated termination date can be prohibitively expensive, as many leases levy steep penalties for early returns.
• Leases commonly charge you extra if you drive more than the number of miles specified in the lease.

Answer 7

Leasing is good if you get a new car every few years and are always making a payment anyway. Typically lease payments are less than purchasing payments. So you can get a better car for your monthly payment budget.

But make sure you are well aware of your driving habits before signing those papers. They have different mileage packages. The less miles you drive, the cheaper the payment because you won't depreciate the car so much. The lower the mileage when you turn in the car, the more it's worth. So the finance company can get more for it at auction. But if you fall for that cheaper payment because you " think" you won't drive that much and you do. You will get slammed with over mileage fee's when you turn in your car.

Answer 8

Tax write off is the main reason most people lease along with having a new car with full warranty and no fear of breakdown expense.
Leasing a vehicle is the same as paying rent, you simply get another car at end of lease and keep paying for as long as your driving.
But is it better to buy pay of the loan and drive for a few years having no payments,,, AHHHHHHH there is a question, go to my website http://www.usedcartips.org/ study some steps and find out whats best for you

Answer 9

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RE:What are the pros and cons of buying a car through a lease?

Answer 10

Pros:
-For the same monthly payment, you can drive a nicer car than if you financed. (lease payments are lower than financing payments)
-You're always covered under warranty, and often get free maintenance

Cons:
- You never really own your car, unless you decide to buy out at the end
- You cannot modify your car
- You have limits on mileage
- You need to worry more about any damage on or in the car.

Answer 11

If you drive a lot of miles a year a lease may not be good for you.
If you go over the lease miles you get charged like a dog.
Now if you do not drive over the lease miles and do not cause any damage to the car, ie drilling holes for body accents or accidents. You get a low payment and get to drive a new one after you turn it in and lease another one.