Should I Lease a Car? 3 Questions to Ask
A good answer to the question "should I lease a car" is never straightforward. It's true that purchasing is usually the best financial choice in the long run but very few drivers can say their goal is to save as much money as possible over the next 10 years. Even fewer are able to do what it takes to actually do that, which often requires keeping a vehicle in good condition and making bigger payments due to the loan principle. There are some questions you should ask to help you decide if you should lease a car.
What Can I Afford?
You can start by figuring out how much money you can put towards car payments each month. Make sure you save at least 20% of your income for a rainy day or, more important, an emergency. You'll have two choices for what you can do with the sum you come up with. You can obtain a newer (or more expensive) car by leasing or you can purchase an older car and then own it once it's paid off. You can find some comparable monthly rates this way because lease payments are lower than loan payments, with the exception of loan payments with an unusually large down payment. For the exact same vehicle, lease payments can be hundreds lower than loan payments. Of course, if you have enough money to just buy a car straight away or put a big old down payment on it, you should just do that.
Am I Open to Restrictions?
The most disappointing downside to leasing is probably the restrictions involved. You are limited to a certain mileage limit each year and you must return the vehicle at the end of the lease term. You'll also have to keep the vehicle in good condition or risk incurring fees. Although, you can buy insurance to cover that. Still, for some, these conditions make leasing unattractive. Others think they're no big deal.
How Much Uncertainty Is There About My Future?
If you can't predict how many miles you're going to put on your vehicle but you know it's going to be a lot, leasing might not be right for you. You could end up paying an extra fee per mile when you surpass the limit. That's one of those restrictions we mentioned.
Likewise, if you think you might be moving to New York and using the subway or leaving the country soon, leasing might not be right for you. There are a few ways to get out of a leasing agreement but some dealers don't offer a complete release from responsibility. That means a lease swap (lease assumption) may be allowed, which would transfer the lease to another driver, but you still may be held responsible if the new driver can't pay the monthly bill. You should check with your dealer (and probably look it up on the website, to double check) before you sign the papers.
Have a better idea of what to do now? We hope so. Whether you're leasing or buying, you should get quotes from your local dealers online. It will help you locate the best deal, taking current incentives into account, and you'll save time. Click here. It's free!