The 3 Things You Should Consider Before Leasing a Car
Leasing is one of the most affordable and easiest ways to take home a new car.
While leasing is not preferred by everyone, it is hard to deny the advantages of leasing versus buying a new car. For starters, there is no need to spend a large chunk of cash for a down payment. Buying a car is more expensive because you have to pay for the entire selling price, including options and taxes.
Leasing, on the other hand, will require you only pay for the ‘use’ of the car alone, specifically the depreciation of the vehicle over the lease term.
Leasing does have disadvantages. Here are the 3 things you should consider so you can easily figure out if car leasing is the best option for you.
1. Mileage restrictions.
Leasing comes with mileage restrictions, although the actual mileage will vary depending on the car and the leasing company.
If you are a high-mileage driver, or frequently travel a considerable amount of distance on a daily basis then you might end up paying mileage charges after the lease expires. The applicable mileage charges will be charged on a ‘per mile’ basis, with an average of 18 to 20 cents per mile. For example, if you travel an average of 17,000 miles per year with a lease term that only prescribes 12,000 miles per year then you will pay for the excess of 5,000 miles.
If the ‘excess mileage charge’ is 18 cents per mile, then you are expected to shell out $900 per year, or an additional $2,700 on a 36 month lease.
2. Additional charges for wear and tear.
The term ‘wear and tear’ may count for dings, dents, paint chips, interior damage, and even carpet stains on the car. You will need to take car of the car as if it were your own. Car dealers will charge you a significant amount of money if you return the car in an unsatisfactory condition.
3. You have no equity over the car.
Since you are only paying for the depreciation of the car and not the selling price, and since you are required to return the car to the dealer after 24 or 36 months, you have no equity or ‘ownership’ over the car.
This is not entirely a bad thing at all. Since you retain no ownership over the car, this also means that you need not bother about selling or trading the car. Simply bring the car back to the dealer and choose your next car lease.
Leasing is now a popular option among car buyers. With lower monthly payments and low interest rates (money factor) compared to buying or financing, leasing is the right choice if you want to drive a new car without hurting your budget.
