Leasing vs. Buying is not a simple choice. There are a lot of factors that determine which is better. If you drive less than 10,000-12,000 miles a year, keep your vehicle in perfect shape, park your car at a safe location, want lower monthly payment, leasing is for you. On the other hand, If you drive a lot, then leasing will cost you more money.
Pros of Leasing a Vehicle / Advantages of Leasing a Vehicle:
1. Lower Monthly Payment:
If you lease a vehicle, your monthly payment will be lower compared to a financed vehicle. You can invest the money which you saved leasing a vehicle.
2. Don’t Worry About Depreciation:
Never buy a depreciating asset. Always rent them. Vehicle is a very rapidly depreciating asset. The moment you drive off dealers lot with a newly purchased vehicle, it’s loses 10% of its value instantly. After owning another 6-7 years, it loses 60-70% of its value. So buying a car is never an investment, its a liability. If you lease your vehicle, you don’t have to think about depreciation. At the end of the leasing period, you return your vehicle for another new vehicle.
3. Worry-free Vehicle Ownership:
If you lease a new vehicle, there will be no significant maintenance for the first three years. After this three years lease period, return your vehicle and lease another new one. For luxury car brands such as BMW, Porche, etc. all the maintenance cost kicks in after three years. If you own that vehicle, it will be a significant headache.
4. Low Sales Tax:
When you buy a vehicle, you pay all the sales tax upfront. When you lease, you don’t pay all the sales tax upfront. You pay a portion of the sales tax each month. This saves you some money.
5. Smart Idea:
Some argue that leasing an Electric vehicle is a smart idea. Electric vehicles technology is changing rapidly. Electric vehicle’s battery degradation is also problematic. It’s battery, motor, infotainment systems are actively being developed. Like a smartphone, electric vehicle becomes old quickly from a technological perspective.
6. Own the Vehicle:
At the end of the lease term, sometimes you may have the option to purchase the vehicle. Ask your dealer about this option’s availability.
7. Drive a new vehicle every 2-3 Years:
Vehicle lease will allow you to drive a new car every 2-3 years.
Cons of Leasing a Vehicle / Disadvantages of Leasing a Vehicle:
1. Mileage Limitation:
Leased vehicle comes with a yearly mileage limitation ranges from 10,000 miles to 15,000 miles ( sometimes a high mileage lease also available ). If you drive over this limit, you have to pay a fee on a per-mile basis ranging from $0.10/mile to $0.25/mile. If you drive a lot, this could be problematic from a financial standpoint.
2. Must keep your vehicle in good shape:
Beyond normal wear and tear of your leased vehicle, you are on the hook for additional fees. Dealers will inspect your vehicle before you can return it. Don’t expect your inspector will be lenient. If there is any damage which dealer considers excessive wear and tear, expect to pay full market value for those damages out of your pocket. Any windshield damage, scratches, dent is also extra cost. Before you lease, ask for guidelines for these lease-end conditions.
3. Monthly payment continues until you return the vehicle to the dealer.
4. Usually, insurance cost is higher for a leased vehicle compared to a financed vehicle.
Avoid these mistakes when you lease your vehicle:
- Don’t lease for too long.
- Keep your vehicle in good shape.
- Don’t put too much money upfront.
- Buy GAP insurance.
- For high mileage lease, buy extended warranty.
- Comment Section: https://www.moneyunder30.com/why-you-should-never-lease-a-car
- Vehicle Depreciation Calculator: https://goodcalculators.com/car-depreciation-calculator/
- Lease mistakes to avoid: https://www.bankrate.com/loans/auto-loans/5-dumb-car-leasing-mistakes-to-avoid/