Leasing a car is one way to lower your monthly car payment, but not everyone is a good candidate for leasing. For one, leasing a car usually limits the number of miles you can drive per year, and you may have to contend with a number of fees at the end of your lease. However, if you are looking for a relatively affordable way to drive new vehicles, it could be worth pursuing.
4 factors to consider before leasing a car
Before signing off on a new vehicle lease, take time to decide whether leasing is the right choice for you.
1. How many miles you drive
All car leases have mileage limits, usually 12,000 miles annually or less, so if you drive more than that, you could end up with a hefty bill at the end of your lease. Additional miles are charged at a per-mile rate, which can add up significantly if you exceed your limit.
Calculate how many miles you drive annually and think about how likely that is to change over the length of a lease. If you’re expecting to take a lot of road trips, a lease may not be right for you.
2. How well you care for your car
When a leased car is returned, it will be sold, most likely at wholesale auction. Because of this, the car dealer wants to see the car in perfect shape to garner the highest price.
Be prepared to be charged for any excessive scratches, door dings, dents, interior stains, upholstery rips or damage from accidents. It may be cheaper to fix the damage yourself before turning in the car than it is to wait for the leasing company’s charges for the same repairs.
3. How many upfront costs you’ll face
While the big appeal of leasing is a lower monthly car payment, many people don’t consider the initial costs to get into a lease. You will need to pay taxes, title fees, licensing fees, dealer documentation fees and prep charges at the lease signing — and sometimes you will need to pay a down payment to top it all off.
The lease may also come with an acquisition fee or a drive-off fee. This can add up to thousands of dollars. When comparing the cost of leasing versus buying your vehicle, make sure that you include all of the fees you will encounter.
4. How much flexibility you need
One of the benefits of leasing is that you don’t keep the car for as long as you would if you bought it. Even still, you may want to exit your lease before it’s up if you are unhappy with the car. However, getting out of a lease early is expensive and, in some cases, more difficult than selling or trading in a car you own.
If you are not sure whether you will be happy with the car for the duration of the lease, consider buying instead. You can also check to see if your contract allows lease transfers, which is the only affordable way to get out of a lease early — provided you can find someone to take over your lease.
The bottom line
There are advantages and disadvantages to leasing a car, and it isn’t right for every driver. If you want to experience different higher-end vehicles while keeping your monthly payments low, go for it. But if you drive a lot and want to avoid mileage limits, leasing might not be the best option. Take advantage of a leasing versus buying calculator to weigh the cost difference before signing off on a new auto lease.
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