Does leasing a car make sense?
If you compare monthly payments for leasing versus borrowing for a brand new car, you’ll find that lease payments are about half those of a loan for a term of 3 years.
But what if you are considering a used car, not a brand new one?
First, only brand new cars are leased, not used. However, if payments are only half that for a brand new car loan, it means that you could lease a brand new car for about the same payments as for a loan on a used car that costs half as much as brand new.
Stated another way, since an average car loses half its value in 3 years, you could lease a brand new car for about the same payments as for a loan on a 3 year old used car.
Therefore, if you are thinking of buying a relatively new used car, leasing could provide you a way to drive a much newer car for the same money.
Of course, if your budget doesn’t allow a relatively new car, then leasing may not be the answer for you.
Are there other things to consider if I choose to lease?
First, leasing is not a way to own a car, even after the lease has been completed. However, most leases offer a purchase option at lease-end that allows you to buy the car for the part of the original value that you haven’t already paid during the lease.
Furthermore, leasing requires that you only drive a “normal” number of miles — about 10,000 miles a year — and that you keep the car in good condition. Any unusual wear or damage must be repaired prior to returning the vehicle at the end of the lease.
You also don’t have the same level of flexibility with a lease. Although ending a lease early is possible, it can be very expensive. Leasing is best for people with a stable lifestyle and who will not want out of their lease before its normal end.
If you want to learn more about leasing, go to LeaseGuide.com.