Leasing a new car is simply better for some people, are you one of them?
Leases are certainly appealing in many ways. Lately, it seems like there are plenty of really great advertised lease deals. For example, a seven-passenger, luxury SUV for $499 per month, or a well-known, reliable compact sedan for $169 per month. At the very least, these ads get your attention.
Many may dismiss leasing as a waste of money. And it's true, leasing a car is more expensive in the long run compared to buying one and paying it off. But for some car shoppers, it is the smarter choice. Here's how to tell if you're one of them:
You own your own business and need a fixed cost for transportation. Leasing can be a way of managing repair and maintenance costs as you'll likely have an all-new car every three years. The monthly cost of leasing a vehicle can also be a tax write-off for those who are self-employed.
You plan to buy a new car every two to three years. A person purchasing a new car every few years will lose money on depreciation, a person leasing just pays for the use of the car and turns it in when the agreed upon period is over. Assuming you take good care of the car and you stay within the agreed upon mileage, leasing can be less expensive in the short term.
You want the newest and latest in-car technology. When it comes to in-car tech, four years can be an eternity. Cadillac, Chevrolet, Ford, Kia and Toyota are just few brands that have recently updated their in-car information and entertainment systems in a big way. We expect this trend to continue as technology evolves more and more quickly.
You don't mind paying for convenience. Never having to worry about maintenance or repairs and simply giving the car back at the end of the lease term is certainly convenient. Zero-down lease deals, like VW's Sign and Drive make the option even more attractive. But just like using a valet to park your car or paying a lawn care company to cut your grass, that convenience is going to cost you. While it can be a cheaper short-term option, you're also signing up to always have a car payment in your budget. If paying the absolute least amount of money possible is your main goal when it comes to buying a car, leasing is probably not for you.
Keep In Mind...
If you've reached the conclusion that leasing is the better option for you, keep these tips in mind when you're shopping:
1. Put as little money down as possible. Dropping $4,000 to $6,000 on a lease down payment doesn't make sense. You will never get that money back. You want to pay very little money up front and still get low-monthly payment.
2. Don't lease the car for longer than the warranty term. If you're leasing a brand of car with a long-history of reliability this is less of a concern, but you don't want to be stuck paying for repairs out of your own pocket while still making the monthly payment. Three years or less is a good rule of thumb.
3. Make sure the mileage limits are reasonable. If you have a long daily commute, a 10,000 mile per year lease probably won't work for you. The extra cost for "over mileage fees" will be more expensive than just opting for a slightly higher monthly payment.
4. Get as many options as you can afford. When you lease a vehicle, you're paying for the portion of the car's value you use during the lease - not the total cost. This applies to options as well - the $3,000 navigation package won't cost you $3,000 extra dollars over the lease term. You only pay a percentage of that, based on how much that option impacts the car's value at the end of the lease term.