I'm in the market to buy or lease a car. I've always heard leasing is a bad idea, why is that?

Question

Aside from not owning the car at the end, what's the negative to leasing a car?

Answer 1

Leasing in a nutshell - you pay for what you use, plus a little interest. Leasing is good in certain circumstances, and not so much in others. I'm going to break down positives and negatives of leasing to hopefully help you decide if it's something you should pursue.

Positives
1. You pay for what you use - you pay on the depreciation of the vehicle, and only pay sales tax for what you use as well. In essence, you would only be paying for half of the vehicle, and half the sales tax that you would if you were to outright purchase or finance.
2. The car would be under warranty the entire time you drive it.
3. After the lease term is up (usually 36 months), you can decide if you want to keep it or give it back. The only situation I would keep a vehicle is if the actual value is higher than what you were paying on - you can make some $ back. At the end, you can give it back with no strings attached, and either lease another car, or purchase one at that point.
4. Monthly payments are typically lower than financing
5. Manufacturers often have leasing incentives available that equates to sometimes even having a 0% interest rate.
6. Gap insurance - get it to cover in case you get in an accident, or if there is something that would cause your car to have a lower value. This will help you be rid of your car with minimal issues at lease end if you got in an accident, or if there's some body damage or other things that could cause you to have to pay extra to restore value in the car.
7. You can usually get out of a lease early without a penalty. This depends on who the lease is through and the terms in the fine print on your contract. Read them carefully.

Negatives
1. You don't own it (obviously)
2. Mileage limit each year (usually 12,000)
3. Cannot make changes to the car (i.e. don't add aftermarket stereo or anything custom)
4. You can be put on the hook to cover anything that caused lost value in the car beyond normal depreciation. Have gap insurance built into the lease.
5. Car insurance must be full coverage (might cost you a bit more than what you're paying now)
6. Some dealers are shady and can try to bump up the money factor on you. In most cases you won't even realize it, because the only thing that is really presented to you is the monthly payment.

Money factors are written as 0.00159, or something like that. If you are considering leasing, still negotiate the price on the car, then ask for the money factor. Before you decide a lease, go to the site below to calculate what the lease should be to ensure the dealer didn't try to put one over on you.

Answer 2

There are some good answers here (RyanK). But outside of the financial comparisons to buying, which are confusing to most, there is a straight-forward way of looking at it too.
Don't lease if you have any habits or circumstances that would cause a vehicle to depreciate quicker than would normally be the case. Because in the end, you will have to pay the difference between what the car should be worth, and what yours actually is worth. This would apply to: 1) having 2 or more kids under the age of 10 in the car often [1 kid can be ciontrolled]; 2) normally treating your car like a bathroom, trash can, or restaurant; 3) driving everywhere in that car. So, basically having a lifestyle of a parent with young children and not being the neatest person in the world would make leasing a bad idea (i.e. what happens around you has as much to do with random events as it does your choices).

If on the other hand, you are 1) a relatively neat person; 2) don't have young children; 3) are not dependent on the leased vehicle for transportation everyday; and 4) have the habit of looking after your vehicle(s) with care, leasing might be for you. So, basically single lifestyle, driving the leased car to work and important social events (i.e. what happens around you is pretty much dependent on what you choose to do).

Hope this real world look at it helps!!

Answer 3

There's always a debate between leasing vs. buying, I'm sure you find many other articles about this topic.

In our opinion, the most important factors are:

- Budget - If you have a limited monthly budget and would like to avoid expensive repair cost, go with a lease. You will always drive a new car covered under warranty.

You can find some good lease programs here:

https://secure.acscorp.com/partners/pages/111.php



- Mileage - If you drive more than 15,000 miles a year, go with the purchase. Leasing is just not an option for you.

Here's a link for the lowest APR available today:

https://www.harborcredit.com/partners/AutosBargain/landing_purchase.php?partner_id=c2474e40-85dc-4002-876e-1618e50eb5a7


Remember the first step for anyone who's considering to buy a new car: Test-drive and make sure you like it!

Answer 4

Leasing is the same as a long-term rental. That's a lot of money you're paying, and you get nothing back in the end. If you buy, at least you can sell the car afterwards and get some of your money back.

Depending on the conditions of your lease, they can also charge you for excess mil age when your lease expires, or you can buy the car from them for the current market value - but if you wanted to do that, you'd have bought a second-hand car in the first place.

Answer 5

There are positives and negitives to leasing a car. the negitive and most common cause is your restricted to 10,000 miles a year. Now this may not seem like alot of miles. but when you take in to consideration that most people put 1000 miles on a car each month? It adds up. thats 12,000 miles each year. If you have a 2 year lease your over your mileage by 4000 miles. Depending on what their rate is for over mileage. that can cost alot. My sugestion is to find a car that has been leased the purchase that.

Answer 6

Depends entirely what suits you best. In a purchase, you pay for and eventually own the vehicle. In a lease, you are essentially renting miles and paying for the use of the vehicle. At the end of the lease you can then buy it, or walk away, or lease another newer one.

Answer 7

Individual person, buy the car.
Company, lease, it can be written as an expense.