As a new car buyer, what are the pros and cons of leasing a vehicle rather than buying it?

Question

I'm very close to making my first car purchase but I"m still deciding on should I buy or lease. For the most part I know that through a lease that there are mile restrictions and you can't customize the car which are things that I can adjust to. Honestly I'm leaning more towards leasing because most people don't really keep their cars these days and trade them in after a couple of years anyway. With that said what are the the major pros and cons that someone should know before entering into a lease.

Answer 1

The 3 big advantages to leasing a car are:
1) You can drive a better car for less money
2) You can trade in a car every 3 years or so, so there is no long-term commitment
3) You don't have to negotiate a trade-in at the end of a lease.

I have both purchased and leased vehicles for me and family members, depending on how we are going to use the car
I use these rules of thumb:

You should definitely lease a car if you meet all of the following:
1) Your credit score is 700 or above
2) You are going to drive the vehicle 12K miles or less annually
3) You are the type that likes to get a new car every 3-4 years.

Conversely, you should buy a car if:
1) Your credit score is less than 700
2) You drive 12K+ miles annually
3) You want to drive the car into the ground.

There are also situations that vary by make/model that will influence your decision.
For example, if the manufacturer is offering 2.9% financing for 60 months on the car you want to buy, it may be better to buy over lease.

Also, keep in mind that if you are worried about putting a large down payment down on a lease, you can request the dealer to offset this amount by either raising your monthly lease payment or extending the lease time (by 6-12 months, for example).
Hopefully you find the below link helpful.

Good luck.

Answer 2

With the average cost of a new vehicle rising each year, it is becoming more important to understand the options available for financing. Leasing has become a much more widespread option available to consumers through a number of different sources including independent leasing companies, automobile manufacturers, local dealerships and financial institutions.
Because of the variety of different leasing plans available, the amount of regulation of the leasing industry, and what can sometimes be a high stress situation of negotiating a price for a vehicle, consumers need to be well informed so they can make a decision that best fits their individual situation.
The basic principle of leasing is that you pay only for what you use of the vehicle. The most frequently cited advantages of leasing are that leasing requires a lower initial cash outlay, the monthly payments can be lower than a loan, and you can usually get more vehicle for your money. Common disadvantages are that at the end of the lease you dont own the vehicle, and you may get charged for excess miles driven and excess wear and tear on the vehicle.
The basic principle of buying your vehicle, either with cash outright or with a finance agreement, is that you have or are building equity toward ownership. The main advantage is that you own the vehicle after all the payments are made. The main disadvantage is that by the time you actually own the vehicle, it may have cost you far more than the vehicle is worth.

Answer 3

I've always purchased. Felt that leasing cost way to much.

You need to estimate how long you are going to keep your car and what the expected resale vale will be.

I'm looking for a new car. Been driveing the van for 10 years now.

I paid $26,000. I figure it's worth $5,000 now. If I divide the $21,000 I've spent by the 120 months I paid $175 a month for a car. ( I accually paid high payments the first 4 years and drive it for free the last 6.)

When you least your typicaly have a monthly payment and a down payment. Let's say $200 a month for 3 years and put $3,000. This lease is 200+(3000/36) = $283 a month for the car.

Leases are't bad they are just a higher cost because you always have a "new" car. And you must follow their rules or it could cost you big when you turn the car in.

My friend never changes oil, breaks, tires, wiper blades... Because he leases and doesn't want out of pocket expenses. It's only has to get him to the end of the lease. He always pays for "Detailing" before he turns the car in. Don't know if it helps.

Answer 4

Personally I'm fed up with buying new cars. Been there, done that, no point. Buy a silghtly used one and you'll save a ton of money. Add a warranty to the silghtly used one and still save money AND you can take the car almost anywhere to get it repaired.

But if you're dead set on a new car...

Don't lease unless you know, beyond a shadow of a doubt, that you're not going to:

Modify the car
Sell the car early
Go over the stated mileage (at all)
Want to keep the car

To be fair, most leases are for 2-3 years, and after that point unless you got a 4 year loan, you wouldn't have built any equity anyway. But mileage is killer. If you go over the agreed upon mileage, you're screwed. And if you decide to keep the car you'll have to pay for it as if you haven't put a dime into it.

Answer 5

Leasing works very well for some people and is not a dealer scam. It's simply an alternative method of financing that offers lower monthly payments, but it's not like renting. Unfortunately, a lot of people lease when they don't understand leasing. They get in trouble or are disappointed and then declare that leasing is evil and is a scam.

A good leasing candidate has a stable lifestyle and income (to finish the lease), drives no more than 15,000 miles a year, takes care of their vehicles, doesn't have an emotional need for ownership, doesn't modify their vehicles, and likes to trade cars every three years or so.

The following web site provides a lot more information about how leasing works:
http://www.LeaseGuide.com/index2.htm

Answer 6

Financially speaking, leasing is the way to go because of how poorly vehicles retain their value. With a lease you are basically only paying for time you use the vehicle.

The only read downside is that leases have mileage restrictions that you need to be sure you can meet, because the penalty for going over is pretty steep, usually $.10 to $.15 cents *a mile*.

The upsides are that leases are generally cheaper to get into upfront, have lower monthly payments, and give you the largest options of what to do with the vehicle. If you love the car you can refinance the remainder balance and own it, if you dislike it you can bail and get something else.

Owning a car these days is a financially defeating prospect, generally speaking.

Answer 7

Pros of leasing:

1. No downpayment required. But you do have to pay what's called "Total Drive-Off" which are 1st month's payment, DMV fees, bank fees.... totalling around $1500.

2. No need to worry about resale value at the end of the lease. Just turn it in and walk away. But you will be responsible for any damages beyond normal wear and tear.

3. You can trade-it in, sell it or sell your lease anytime you wish.... just like a financed car.

4. You can afford luxury cars for about the same payments of a Honda Accord. For example, you can lease an Acura MDX or Lexus RX350 for $499.

5. You can purchase extra mileage prior to the lease at a discount. Most will include 15k miles... but I have heard others who were able to get 20k miles included for free.

6. You don't need to have FICO 700 to lease.... Lexus will do it even if you have 650. Less than that, probably not. But European makes like MB & BMW do require about FICO 730.

7. GAP insurance is usually included in the payments. Make sure you have this in case the car is totalled. It pays the "Gap" between what you owe and what its worth.

8. Some leasing companies will include free end of lease coverage (covers any damages).

9. Most leasing companies will offer you a lower buyout price (lower than the residual value listed in the contract) just before the lease is over. IF you like the car you can then purchase it at this time.

10. You are no longer "trapped" in a lease because leasing contracts are easily transferrable (unlike finance contracts).... with popular sites like Swapalease.com and Leasetrader.com you can find someone to take over your lease with a click.

Answer 8

Unless your a corporate exec. that is going to trade up every year then leases aren't for you. Shop around for the best deal to purchase a returned lease and you can save some bucks off the new car price, other than that, don't even consider the lease option it will cost you more in the long run.

Answer 9

a lease ALWAYS cost more in trhe long run! Yes there are milage restrictions but other "hidden" costs as well...minor dent/dings...scraped/scratched paint... you have NOTHING in equity when "trading" it in EVER!... so when you lease again you'll have to come up with more money down..leasing is NOT good except for business owners that can write off expenses.

Answer 10

if you fined a private party that got a good lease and not a liar they are shred business people it has been over 15 years i heard about a good lease