What are the pros and cons of leasing a car?
Tristate Auto Champs brings you another automotive leasing blog, giving you the top 5 Pros and Cons of leasing. We’ll provide the facts and let you decide about the importance and priority of these benefits to you. So, let’s dive in.
What are the Pros of Leasing?
- Lower Monthly Payments Because you only pay for the portion of the value of the car or truck that you actually use, your monthly lease payments are 30%-60% lower than for a loan for the same car and same term. You only pay for the depreciation of the vehicle, meaning majority of the risk involved rests on the leasing company.
- No Down Payment Required New car leasing provides the option of making no down payment, although you must still make the first month’s payment and official tag and registration fees. Sometimes you can even roll in all the fees. Some promotional lease deals require a down payment to get to the advertised monthly payment.
- More Car, More Often Since monthly lease payments are lower than with buying, you get more car for your money and drive a new vehicle every two to four years. It’s equivalent to upgrading your cell phone. A luxury vehicle can often be leased for the same or lower payments than loan payments for a less expensive economy vehicle.
- No Trade-In With leasing, the headaches of selling a used car are eliminated. It doesn’t matter if the vehicle has a bad Carfax. When your lease ends, you simply turn it back to the leasing company and walk away, unless you decide to buy it out. An expert at TriState Auto Champs can even negotiate a dealer to buy out your lease at a higher amount so you can roll the positive equity into your next lease.
- GAP Coverage Included All car leases in the tristate area automatically include free “GAP” protection in case your vehicle is totaled in an accident or stolen. Gap pays off your vehicle when your insurance doesn’t cover the full loss. Loans do not generally come with automatic GAP protection and must be purchased separately. This is a $150-$895 savings.
How About Cons?
- Early Termination Cost If you terminate your lease before the end of your contract, the cost is usually very high, much higher than might be expected. Many times it does not make financial sense to do this. However, that cost can be minimized by making the right termination choices. Majority of driver’s end their lease on schedule, which avoids all early termination costs.
- Excessive Mileage Charges If you exceed the mileage allowance in your lease contract, you will be charged for the extra miles at a specified per-mile rate. A large mileage excess could result in a hefty charge, even at a reasonable per-mile rate. You can reduce your exposure if you “buy” the extra miles you expect to drive at the time of lease signing. Some banks allow you to buy more miles, and avoid the higher end-of-lease charge.
- Excessive Wear-and-Tear Charges If you return a leased vehicle at lease-end with excessive ding & dents, scratches, or unrepaired accidental damage, you will be charged — because those damages reduce the vehicle’s value. All lease contracts and leasing companies clearly state what is considered “excessive” so that you’ll know if you should get it repaired before returning your vehicle. Typically it is cheaper to get the repairs done yourself versus allowing the leasing company to do the work. Lease companies normally don’t charge for minor scratches, dents, or stains. Get any required repairs done yourself before you return the vehicle and avoid being charged.
- Possible Higher Insurance Cost Since new-car leasing and loan companies typically require full-coverage insurance, your insurance might cost you more than you would normally have on your other vehicles, especially if you normally carry only state-required liability insurance. However, insurance cost can be minimized by shopping for the best leased-vehicle rates at different companies. Customers are often surprised at the discounts given for driving a safer car.
- Higher Credit Requirements Leasing does require a higher credit score than buying with a loan. The thought process form the manufacture’s is that, they only want to rent a vehicle to lessees who will take care of the payments and new car. For those with marginal credit, a large down payment or security deposit may be required to be approved. If you don’t know your credit scores, you should — all three of them.