$199 a month! $149 a month! $99 a month! Most of those low monthly car payments you see and hear advertised are actually lease payments. They’re tempting, but there’s a lot more to think about when you’re weighing leasing vs. buying a car
You can get more car for your money.
For example, with a budget of $300 for your monthly payment, you have a nice choice of affordable auto leasing options. To own the same vehicle with the same monthly budget, you’d need a hefty down payment.
You can always have an up-to-date vehicle.
When your lease term is up, you essentially have two choices:
- Buy the vehicle at the “residual value” amount in the lease agreement.
- Return it and, if you wish, lease a new vehicle.
Option #2 is appealing if you’re a “car person” who craves the latest and greatest—or if your budget doesn’t allow for a large down payment for a vehicle.
What are the downsides to leasing?
Excess mileage charges. Your leased car will have a mileage allowance, typically 1,000 miles per month, or in the case of a 3-year lease, 36,000 miles total. After that, you’re responsible for every mile you put on the car—as much as 20 cents per.
A thousand miles per month might seem generous. But before you take the leasing plunge, start keeping a daily log of your mileage—you might drive more than you think.
Excess wear-and-tear charges. Leasing companies may not penalize you for little nicks or scratches in the paint. But if you return the vehicle with unrepaired dents, deep scratches, etc., you’ll be on the hook.
That goes for the interior, too. Kids can be messy. And if you’re the outdoorsy type, you’re going to bring a lot of dirt into the vehicle. Leaseholders often have their cars detailed before returning them.
Insurance may be more expensive. You’re basically paying to borrow a car that’s not yours—so the leasing company will require you to take out higher minimum coverage than if you were purchasing the car.
You always have a car payment. When you pay off a purchased car, you’ve got a few hundred extra bucks in your bank account each month. Consider how much vehicle quality has improved over the years, and you could be payment-free for quite some time.
You can’t customize it. It’s got to go back to the dealer the way you drove it off the lot. (Don’t lose any accessories that came with it, either.)
In the end, the decision to lease or buy a car is yours. There’s a lot to consider, so take the time read the lease terms closely, and dig deep to factor in ALL your costs. If you’re in the market to purchase a new or used vehicle, contact Pen Air and get pre-approved before you shop. This will provide you the purchase power and bargaining leverage you need prior to making your next vehicle purchase. Get pre-approved today at www.penair.org/AutoLoans