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Leasing a car is one way to lower your monthly car payment, but not everyone is a good candidate for leasing. Here are four factors to help you determine whether leasing a car is right for you.
1. How many miles do 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. 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.
2. How well do you care for your car?
When a leased car is returned, it will be sold, most likely at wholesale auction, so the car dealer wants to see the car in tip-top shape to garner the highest price. Be prepared to be charged for any excessive scratches, door dings, dents, interior stains or rips, as well as existing damage from accidents. It may be cheaper to fix the damage yourself before turning the car in than it is to wait for the leasing company’s charges for the same repairs.
3. What are your upfront costs?
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’ll need to pay taxes (at least a portion of them), title and licensing fees at the lease signing, as well as the dealer documentation and prep charges. The lease may also come with a down payment, sometimes called an acquisition fee or a drive-off fee. This can add up to thousands of dollars.
4. Are you sure you’re going to be happy driving it?
One of the benefits of leasing that’s often cited is that you don’t keep the car for as long as you would if you bought it. But the fact is, getting out of a lease is expensive and, in some cases, quite difficult compared with selling or trading in a car you own.
If you’re not sure you’re going to be happy with the car for the duration of the lease, consider buying instead. If you are otherwise a good candidate for leasing, be sure 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.
Pros of leasing a car
- Lower monthly car payment.
- You keep the car for less time.
Cons of leasing a car
- There is a mileage limit, and exceeding it can be expensive.
- Upfront costs, such as taxes and fees, can be high.
RATE SEARCH: Have you decided you prefer to buy a car? Shop for the best rates on car loans at Bankrate.com.
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