What are the pros and cons of getting a car through a lease rather than buying it?

Question

I'm in the process of entering into my first lease for a car. Before I sign my name on the dotted line I want to make sure that I have weighed both sides.

Answer 1

Depends on a couple factors. Ask yourself 5 questions.

1. Is there a good chance I will still have this car in 6 years?
2. Do I drive more than 15,000 miles per year?
3. Is the car I want to buy an American car?
4. Am I the type of person who is not responsible?
5. Do I have poor credit?

If you answered "yes" to any of these questions, you are likely better off if you buy the car.

Leasing is for people who want to have a nicer car, lower payment, and are responsible enough to keep the $100k/$300k car insurance and do all thier oil changes and other maintaining of the car orderly and timely. The car must have good residual (resale) value, such as Volkswagen, Audi, BMW, Toyota or Honda. American cars usually do not lease well, with the excpetion of Cadillac and some Chrylsers and most SUV's. NOt all imports are good lease candidates. Scion, Kia, and some Hyundais are poor lease cars.

You should also be prepared to put down at LEAST $2000 down payment if you want to lease, and remember the lower the miles you buy the lower the payment, but if you go over, you get charged about 15 cents per mile average. If your credit is not good then you are not a lease customer. Period.

Another option is what is called a balloon. It is similar to a lease but you own the car not the finance company, and do not need ot adhere to the strict paramaters set forth in a lease contract. Volkswagen calls it a Drivers Option, BMW an Owners Choice, Chrysler a Gold Key and GM calls it a Smart Buy. Never do a Ford Red Carpet. Never EVER. That said a GM Smart Buy is no so great either. The others are just fine. This would likely be perfect for you since it is designed for folks whom are not sure if they are going to keep the vehicle long term and are torn between a buy and a conventional lease. With a balloon, you also save on taxes.... BIG TIME. You also do not pay as much upfront for other leasing fees with the balloon, and you own the plates and can put however much insurance on the car you wish, so long as you meet the state minimums where you live.

A balloon also gives you more opportunity to have equity in your car at the end of the term, and negative equity is impossible. If you lease, and decide to trade in before the end, it is like breaking a lease on an appartment, and you are going to pay.

I am not saying leasing is bad, its just not for everyone. I lease myself and I am a car salesperson. My payment is less than it would have been buying and I had negative equity in my trade so I will be done with all rollovers at the end of my lease, which I am happy about.

There is no magic wand. You will either pay now or later. The difference is how long is your commitment. Nobody ever bought a car and made money. Anyone who tells you otherwise is not telling the truth.

For another description go to www.bankrate.com.

Answer 2

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 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.

Answer 4

The only benefit of a lease is that you can drive a car that you really can't afford. Sort of like an interest only or payment option home loan, you pay what the finance company believes will leave you with nothing at the end of the lease term. You are paying only interest and expected depreciation. This means at the end of the lease, you'll be left with no trade-in, no equity, and no car. During the course of the lease, you will likely owe more than what your car is worth, so if your lease allows you to sell, you'll likely have to pay thousands to get out of the car. Purchasing, on the other hand, means you're paying interest, depreciation, and paying toward owning the car. So you'll be building equity as you pay. That means when you go to sell, you might actually have some money to show for your trouble. Most people who are leasing for the first time love it, while those who have leased in the past will tell you to steer clear.

Bottom line: Don't do it. If you have to lease a car, you can't really afford it.

Answer 5

Pros; One has a quicker access to the nice new car, no worries about financing, after the end of the lease you have an option to purchase the car or return it o the dealer, you also get a much cheaper month rate for a nicer car. And you don't have to qualify for a new loan car.

Con; you have put all a (Hugh) no refundable down payment into a car that has deprecated and you do not own it. The price the dealer offers you at the end of the lease is bad compared to if you had out right had bought that car, Or if you bought one for the ongoing able book price at the end of the lease..Cars deprecate r too fast to lease a car. the best thing to do is trade it in every year for a New var if you lease. or if you buy every 2-5 years update.

If you buy a car; it's yours after you pay for it, it has deprecated, but may last 10 years with mini mun mantainence.. IE; Honda's, and some other cars.

Answer 6

I have leased a car, and as a result, I will never lease another car as long as I live. It's no different than renting a car or a house. You throw money away, and at the end you have nothing, and you may even get stuck paying an excessive mileage penalty or for wear and tear. The only entity that benefits is the leasing company, because they charge you up the butt for a few years, make back more than the money they paid for the car, then they either re-lease or sell the car. They make money twice. Then, if you would like to buy the car that you have been essentially renting, YOU are the one who pays for it twice. It's a bad deal. I do not recommend it. The only way it makes sense is if you have a business and it makes some kind of economic sense.

Answer 7

Leasing is for people who want to have a nicer car, lower payment, and are responsible enough to keep the $100k/$300k car insurance and do all thier oil changes and other maintaining of the car orderly and timely. The car must have good residual (resale) value, such as Volkswagen, Audi, BMW, Toyota or Honda. American cars usually do not lease well, with the excpetion of Cadillac and some Chrylsers and most SUV's. NOt all imports are good lease candidates. Scion, Kia, and some Hyundais are poor lease cars.

You should also be prepared to put down at LEAST $2000 down payment if you want to lease, and remember the lower the miles you buy the lower the payment, but if you go over, you get charged about 15 cents per mile average. If your credit is not good then you are not a lease customer. Period.

Answer 8

The benefit of leasing a car is its low monthly payment, since you only pay the difference btw the sale price and the residual value of the car at the end of the lease, over the term of the lease. Your monthly payment on a leased car is anywhere from 1/2- 2/3 of the monthly payment on a purchased car.

At the end of your lease, you can choose to return your car, usually with some fees (returning fee of several hundred dollars, excess wear/tear costs, and over mileage costs, if any). It all depend on how/how much you drive. You can also choose to purchase the car, at its residual value. However, there will be less room for negotiation on the residual value, so whether you lease or buy, negotiate the price up front.

The main thing when it comes to leasing/buying a car is determining if you can afford the payment. If you can afford the payment, buying is a better option since you own the car and wouldn't have to worry paying for additional costs later.

Answer 9

Some pros to leasing:
-Lower payments
-The dealer often takes care of all oil changes, and other matters.
-You are not stuck with the car! In a couple years you can just get a new one. You get rid of it before the usual car problems start kicking in.
-It is an affordable way to get that "new car" smell, and pretty much keep it.

Some cons to leasing:
-You do not own the car, therefore you cannot modify or go on an super long road trip unless you have plenty of miles left.
-You'll have to stay in communication with the dealer.

In my opinion leasing is a good thing if you need reliability, love new cars, and do not want to be stuck with a car that just depreciates!

Answer 10

Leasing is a waste of time because you will never own the car and you have to trade it in after 3 years or pay the balance off in order to own it. Also, you only have so many miles you can use (usually about 15,000 miles) and if you go over those miles before your contract is up, it is like 15 cents per mile. It adds up. That is not part of you payment per month. It is a separate charge. Most dealers push people to lease because they get a commission every time you get a new car with them, every 3 years. They call it the "smart buy", rather it is a "stupid buy". Now, if you like of having a new car evey 3 years, it is probably a good idea. You will never own it. But if you buy, you will own it in 3 to 6 years depending on the loan agreement. You don't have to worry if you are going to go over your mile limit. You can drive it as much as you want and if you do get tired of it after 3 years, you can trade it in for a new one. You may not get as much as you paid for it, but you will get something. At least a trade in. And your interest rate depends on your credit, so that is neither a pro or con on the lease or buy. Leasing is not the way to go. Buy.

Answer 11

I sincerely wish that I had asked this question before leasing a vehicle.
I found absolutely NO good reason for a private individual to lease a car. Sure, the monthly payments are a little lower, but:
1. I had to make a substantial 'security' payment
2. When lease ended, I would be required to make a final payment (which totalled over 15% of the car's _sticker price_)
3. According to the lease terms, I was required to return the vehicle to the dealership in _perfect_ condition, excepting for 'normal wear and tear'.
3a. 'Normal wear and tear' did NOT include tires, brakes, any scratch over 1/8" long, any scratch that penetrated to the primer layer, any dent more than 1/4" in diameter, any dulling of finish
BTW, my vehicle was a pickup truck, so it got used as a truck which scratched the bed a bit. It would have cost me an entire paint job. More on that later.
4. There was hidden in the fine print a clause which obligated me to 25 cents/mile over the purchased limit.
5. I was to return the vehicle with a full tank of gas.
6. There were 34 recalls on it. Yep, count 'em, 34. I got NO recall letters or notices since I did not 'own' the vehicle. The leasing company got all that info and did not pass it on to me.
I paid out over 1500 USD in repairs that would have been covered.
7. On final turn in, the vehicle was to be inspected by the leasing company's agent with NO recourse on his decision.

THERE IS NO REASON FOR AN INDIVIDUAL TO LEASE A CAR.
It may be a good idea for a business, but after that experience, I don't think so.