Is leasing a car worth it?

Whether or not leasing is a better financial option than buying a car largely depends on your driving behavior. Do you like to switch cars often? Are you a frequent driver? Do you take good care of your car? There’s a lot to consider before deciding which road to take, but much of it can be boiled down to few key leasing benefits and drawbacks. I’ll walk you through.

 

Good decision-making is about knowing your options. When you want to get a car, purchasing isn’t your only choice. Leasing one is an alternative worth considering that might make more financial sense than buying your own car.

The basics

By leasing a car, you’re basically renting it from a contractor for a specific period of time. In return, you pay a regular fee to the dealer. Once your contract ends, you usually get the option of either returning the car, or purchasing it at a pre-defined price.

To put it other words: Leasing is a lot like renting an apartment. While it’s yours to use for some time, it actually belongs to somebody else. You’re just borrowing it.

Advantages of a car lease

1.Lower monthly payments

Typically, monthly leasing fees are lower than financing your own car. Also, little or no down payment is to be made and you’re not charged with any upfront sales taxes.

 

2.Changing cars more often

If you switch cars often and you like driving a new model every few years, leasing is probably a favorable option for you. When you enter a leasing agreement, it’s usually for a fixed term of 1 to 4 years before you can change vehicles.

3.Never being “upside-down”

What you pay each month is tied to the car’s depreciation during the leasing term. Since you only pay for the depreciation in that period, you don’t run the risk of being “upside-down” – which is a frequent problem when car owners owe more in debt than their car is worth.

Disadvantages of leasing a car

1.No car ownership

The key drawback of leasing is that you don’t acquire equity in the car. Like renting an apartment, you make monthly payments but you don’t get to own the property when the contract expires. So, you cannot sell the car in the end to get some money to put towards a new one.

2.Continuous payments

When buying a car, your loan will be paid off sooner or later and you won’t have to make monthly payments for the car itself any longer. If you continue to lease, however, you’ll always be paying fees.

3.Additional fees may be charged

There might be some extra charges associated with leasing. Mileage and overage fees can be collected from the contractor if you exceed the mileage limit, for example.

 

The bottom line

Both, buying and leasing cars have their benefits. Which of those matter more to you will depend on your personal preferences and your budget. If you love to get behind the wheel of a new vehicle every few years but don’t drive much, leasing can be an attractive option. If, on the other hand, you’d like a car that you can drive into the ground, buying one yourself will probably pay off. Either way, becoming clear about what you want is the first step to finding the right form of financing for you.