In recent years, leasing has become one of the most popular methods of acquiring a new car. In 2015, leases made up more than 33% of all new car transactions – up nearly 10 percentage points from 2011. But while leasing is rising in popularity, a question remains – is leasing a car actually better for consumers?
Well, the answer is “it depends”. Leasing a Kia Sedona 2017 can be good and it can be bad. It depends on a myriad of factors, including your budget, the length of time you intend to keep your car, the specific vehicle you’re looking at buying – and much more.
But never fear. We’re here to help you understand whether or not you should lease a new car – or save up to buy a new one. In this article, we’ll take a look at the pros and cons of leasing a new car. By the time you’re finished, we’re sure you’ll have a good idea of whether or not leasing a car is appropriate for you.
The Pros Of Leasing A New Car
Leasing is popular for a reason – there are many benefits that lessees can enjoy when leasing a car through a major automotive dealer.
- Lower payments – Lower payments are one of the primary reason that leasing is gaining popularity. Usually, a lease payment will cost around 20% less than an auto loan payment.
- You get a new car every 3 years – If you sign on for the standard 3-year, 36,000-mile lease, you’ll be able to trade in your car every 3 years for a brand-new, current-year model. This makes leasing very attractive for people who prefer driving only new cars.
- No hassles when getting rid of your old car – When your lease is over, you just drive your car onto the lot, turn it in, and that’s it. You can choose your next car, and drive away. This is in contrast to selling a car, which can cause you quite a few headaches, and cost you time and money.
- No down payments – Most auto loans require a 10-20% down payment, as do some leases. However, there are many automakers that offer “no money down” leases. The lower up-front cost of a lease can make it attractive to people who wish to preserve their savings, or don’t have enough to make the required down payment on a new car.
- Your vehicle is always under warranty – This is, perhaps, one of the most valuable aspects of leasing. Your car will almost always be under warranty – most automakers have a comprehensive 3-year, 36,000-mile warranty that will cover almost any mechanical problems you encounter. You won’t have to deal with costly repairs – just bring your car into the dealership and tell them what’s wrong.
- Leasing allows you to take on less debt – It’s a misconception that you’re not in debt if you lease a car. In fact, you are – for a 3-year lease, you’re responsible for 36 total monthly payments – that’s your debt burden. However, this debt is much lower than a comparable auto loan.
For example – you’re paying $200 on a lease. That means the total debt you’ve taken on is around $7000 – 36 payments of $200. Compare this to an auto loan, which is taken out for the entire purchase price of the vehicle.
The Cons Of Leasing A New Car
Despite its advantages, leasing a car is not always a good option. There are many restrictions and other drawbacks that can make a car lease a poor idea – and you may be better off buying a new car outright. Here are some of the cons of leasing a car.
- You don’t own the car – When you pay off an auto loan, you’re paying for your car. Once you make all of your payments, that car is yours – it’s an asset. If you’re leasing a car, you’re just renting it. All of the money you’re paying your auto dealer is going to waste – you’re not investing in an asset.
- You can be held for penalties for excessive mileage, wear & tear – Your contract is going to limit you to a particular amount of mileage – usually 36,000 miles for a 36-month lease. If you drive more than this amount, you may be responsible for mileage overage charges that range from 10 cents per mile to 25 cents per mile – and these can add up in the long run.
- You’ll also be responsible for damage done to your car while you’re leasing it, as well as excessive wear and tear, and you can be penalized if your car isn’t in good condition when you return it.
- You’ll always be making payments on your cars – If you take out a 6 year loan on a new car and pay it off, you’re done making payments! The car is yours! However, if you lease, you’re out of luck. You’ll just have to keep making payments on your car – so despite the fact you’re paying less monthly, you’ll always be making payments.
- You can’t get out of your contract – If you sign up for a 36 month lease, you’re locked in – there isn’t really anything you can do to get rid of your car. Maybe an emergency comes up, and you can’t make your payments. Too bad – you’re just going to lose your car.
If you purchase a car, however, you could sell it if you want to, or if circumstances demand it. By doing so, you can recoup a significant percentage of your investment.
So, Is Leasing A Good Idea For You?
If you value low maintenance costs, steady reliability, and having a brand-new car every three years – and don’t mind that you’re not making a long-term investment in a car – leasing could be a great option for you!
If, however, you’re looking to be a little more thrifty and build up your assets in the process, committing to buying a new car can pay off in the long run, despite higher monthly payments. You can save money, build up your assets, and use your car however you want – no mileage overages or wear/tear penalties.
There are other options, too – many major auto dealers are now offering “lease-to-buy” options for lessees. If you like the car you’ve leased, you can often just purchase it outright when your lease term is up, and pay for the “residual” – whatever the price of the car is when the lease ends.
In the end, there is no right answer. There are many advantages to leasing – and many advantages to buying. So think about this list, mull it over, and consider your overall financial goals next time you think about leasing a new car. We’re sure you’ll make the right decision.