Whether or not a lease makes sense
depends on your situation. There are significant advantages to
leasing. You can often get into a lease with a lower down payment.
You are only paying off the depreciation and a leasing fee, so your
monthly payments are also less.
When you reach the end of your lease,
you don't have to bother with selling it or trading it in. All you
have to do is return it to the dealership.
But, you have to be aware of the
drawbacks as well.
Leasing is a lot like renting your
home - you will never own it or build equity. If you continually
lease, you will never be without a car payment. Someone who buys a
care and takes good care will drive it for years after the payments
stop.
Getting out of a lease early can be
very expensive, as there are steep penalties for early returns. And
if you go over your allotted amount of miles during the lease, you
will have to pay for the extra miles.
You may be able to get more car for
your money with a lease, but that isn't always true. The economy has
made leases more expensive, and loans are often relatively cheap.
There are other issues to consider.
If you like having the latest model of a car, then leasing will give
you that. Few of us are able to buy a new car every few years. You
also have tax issues to keep in mine. If you lease a car and use it
for business purposes, you can deduct depreciation as well as
interest.
You may want to purchase a vehicle if
you are rough on cars. Leased cars must be returned in top shape.
You will pay extra fees if the car has more than normal wear.
Insurance can be tricky on a leased vehicle. If the vehicle is
totaled or stolen, your insurance may not cover what you owe. Gap
coverage will cover any potential shortfalls of your insurance.
If you have poor credit, it may be
more difficult to obtain a lease with reasonable terms. While credit
will affect you with buying also, you should expect problems while
attempting to negotiate a lease.
Leasing may appear very simple; you
set up the terms, length and schedule of payments. But, looks can be
deceiving. It is more confusing and mandates just as much
negotiation as purchasing a vehicle.
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