Leasing a car can be a great choice for the right person, or it could end up costing you thousands more than if you had purchased - don't make this costly mistake!
Here are the top 7 reasons why leasing may be a smart option for you. If you agree with most of these (especially the first one), then by all means you should take advantage of leasing.
Some people just love driving a brand new car every few years. Maybe they're addicted to the new car scent, or perhaps they just want to project a certain image within their community.
There are also those who like to have the latest safety and technological innovations in the cars they drive. Getting a new car every 3 or 4 years guarantees you will enjoy the latest bells and whistles cars have to offer.
Finally, there are those who want a certain type of car right now, but know they may need a different kind just a few years down the road. For example, if you just got married, you may want a nice sleek sedan right now, but if you're thinking about starting a family, you're going to want a safer, roomier car in the near future.
Whatever your reason, if you're certain that you'll be getting a new car in 3 or 4 years, then leasing can be a great choice for you. If you were to finance a car with a typical 60-month loan, and decided you wanted to trade it in for a new one after 3 years - in many cases, you will still owe more money than what the car is worth due to depreciation. It's much better to lease if this is what you intend to do.
The vast majority of leases allow you to drive between 12,000 and 15,000 miles per year. Anything over that will result in large penalties when you turn the vehicle in at lease end. If you were to drive over 20,000 miles per year, your penalty could be in the thousands of dollars.
Some leases offer only 10,000 miles per year, in which case, you really need to be careful with the amount of driving you do. If you know you'll be driving a lot of miles, but still want to lease, you need to pre-purchase extra miles before you sign off on the lease. Paying up front will be a lot cheaper than paying the penalties at the end.
Leasing a car is like signing a long-term rental contract. There is no easy way to get out of it, so if you decide you don't want the car anymore, or you have trouble making the payment, you're going to be faced with severe penalties. When you buy a car, you always have the option of selling it if you don't want it anymore - that's not true with a lease.
There are ways you can have someone else take over your lease, but this is generally a hassle and you will still end up losing a good amount of money. When you lease, you better intend to keep the lease until the end of the contract.
If you don't have a stable job, don't be lured in by a lease just because it has a lower payment - this is a huge mistake that will likely come back to bite you.
Leasing a car generally requires less cash up front. Some leases require no down payment whereas most car purchases require 20% down if you want to get a good finance rate. Your lease payments will also be a lot lower than if you had purchased the same car and gotten a loan for the same time-frame.
Perhaps you don't have enough cash for a down payment right now or maybe you would rather invest that money (this is risky, but that's ultimately your choice). There are also those who are just starting their careers, have stable jobs, and want a reliable car that they may not be able to afford right now.
Just remember that while lease payments will be lower than a car loan payment, you will be left with no vehicle at the end of your lease, whereas with a car loan - you will own the car and can decide to drive it payment free for as long as it lasts.
A major benefit to leasing is that you never have to worry about mechanical issues or repairs. As long as you lease a car for 36 months or less, you will be covered by a bumper-to-bumper factory warranty the entire time. This is important to a lot of people - they don't want to worry about repairs or breakdowns.
If you own your own business and you will be using the vehicle primarily for your business, leasing makes sense because you can deduct almost all of your payments as a depreciation expense. Check with your accountant or tax attorney before you make this decision as laws in each state may be different.
Most leases require you to provide a security deposit. This is to ensure you will pay for any damages when you turn the vehicle in at the end of the lease. If you're the type of person that doesn't take good care of your car, you could end up paying some steep "wear and tear" penalties.
If you have kids that are gong to spill ice cream on the seats, or if you're prone to scratching up your car while parking, you need to consider this before you lease.