The Pros and Cons of Leasing a Vehicle

Should I lease my car or purchase it outright? It’s really a tough call. Both finance agreements and lease agreements can be confusing to understand. At the end of the day, it’s really about your finances, habits, and plans for the future. Here are some things you should consider as you attempt to decide whether or not to lease your new vehicle.

The Advantages (Pros) of Leasing

Lower monthly payments. The monthly payment associated with leasing a vehicle is often lower than for a purchase. This is because you are not paying for the full value of the vehicle because you will not own it when you are finished making payments. This is a great option for someone with a more limited budget.

You pay less in taxes. When you purchase a vehicle, you pay state sales tax on the full purchase price. When you lease a vehicle, you end up paying tax on the down payment and your monthly payments. This means you actually end up paying less in taxes than if you had purchased the vehicle outright.

Easy disposal. There’s nothing worse than attempting to sell a car when you’re ready to purchase a new one. When you lease a vehicle, your only obligation will be to turn it in at the end of the lease period. This means you’ll be free to go out and purchase or lease another vehicle of your choosing.

The Disadvantages (Cons) of Leasing

You’ll never own the car. At the end of the lease period, you will have paid a pretty hefty sum in order to have the right to drive the vehicle, but you’ll never own it. At the end of your lease period you’ll end up either paying a large lump sum to purchase the car (very few people do this), or you will end up leasing a different vehicle while starting the payment cycle over again.

You’ll be required to carry higher insurance limits. When you lease a vehicle, you are in a sense borrowing the car. This means that if you were to get into an accident, the leasing company as the owner could be sued along with you. In order to protect themselves. Your lease carrier will force you to carry higher insurance limits and lower deductibles, all the while increasing your out of pocket insurance costs.

Mileage restrictions. Because you are only renting your car, your lease company will add mileage restrictions as a term within your lease. Most leasing companies will only allow you 12,000 – 15,000 miles per year. If you travel frequently, this number will be far too low. If you go over the mileage limitation in your lease you will end up paying extra at a rate of around $.15 per mile – often more.

Leasing can be a viable option for someone who does not have cash for an upfront down-payment, who wants or needs a lower monthly payment, or who simply doesn’t want to be tied to the same vehicle for too long. A lease can, of course, come with its own set of extra expenses if you aren’t careful. Take your time and consider the pros and cons carefully.

About the Author: Deborah Blair is a professional writer with a focus on personal finance. She enjoys writing about insurance, credit repair, and methods for geting a bad credit loan if you have a poor financial history.

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