Are Car Leases Worth It?
As the price of cars continues to increase with the advent of new technology and economically sound features, the ability to pay for a car upfront continues to decline. Not many people are financially able to choose the car they want and pay cash money for it before they drive it off the lot. The harsh reality is that most of us have to find a way to finance our vehicles. There are typically two ways to finance a new car. There is the traditional car finance loan and then there is leasing. However, leasing a new car has gotten a bad reputation in recent years for a number of reasons, so many consumers want to know, are car leases worth it? You must realistically look at your own financial and car use situation to be able to determine if leasing or financing is the best option for you.
Buying vs. Leasing
When you buy a car, you are financing the full price of the car plus interest and taxes. Your loan may go as long as seven years for pricier new model cars or trucks. This is a long term commitment in which you will own the car free and clear at the end of the loan. However, if you decide to trade in or sell your car before the end of the loan, you may have negative equity (be upside down) in the vehicle. If that is the case, you are then responsible for paying the difference. With a lease, you only finance the price of the car for the time of your lease. Most leases are only for three years, so at the end of the lease you are able to turn the car in and walk away assuming you have maintained the car and its appearance as well as stayed in the mileage range you agreed upon. If you have damage to the car about normal wear and tear or have gone over your mileage limit you will have to pay. While this may seem daunting, these things can also negatively impact the resale value of a car you trade in or sell. In reality, buying vs. leasing is a personal choice.
Advantages of Leasing
There are several advantages of leasing that you should consider. The most attractive advantage is that you can feasible get a new car every three years without having to worry about depreciation and resell or trade in value. If you enjoy driving a new car with the latest technological features, and you know you probably will not drive a car long enough to build up positive equity, then leasing may be a viable option for you. Another benefit of leasing is you may be able to afford more car for the money considering you are only paying for the car in the short term. Considering that the down payment is usually lower than buying and can sometimes even be waived, a higher end car is many times budget friendly when leasing.
Consider all these factors when deciding are car leases worth it. Depending on the amount of time you want to keep the car and the budget you have, leasing may be the way you should go.
