Leasing a vehicle is one option for those who wish to have a car at their disposal for their transportation needs. Whether taking a long-term rental makes sense for you will depend on your preferences and your personal finances. So, should you lease your next car?
There are arguments both for and against leasing your next vehicle. Understanding the pros and cons can help you determine whether or not it is the right decision for you.
Car Leasing — What Does It Mean?
Leasing a car is essentially renting a car. Rather than purchasing a vehicle that is yours outright–either via cash or taking on financing–you will pay monthly payments for the rights to drive the car for the life of the leasing agreement.
In practice, you will put down a down payment or deposit on the car, after which you will be responsible for paying a monthly leasing fee. Leases tend to range between two to five years, with most falling within 24-36 months.
As part of your agreement, you will likely have a maximum mileage cap for each year, along with an agreed-upon price at which you will have the option to purchase the car once the lease expires.
What Are the Benefits of Leasing a Car?
There are a number of benefits of leasing a car. These include the following:
(1) Cheaper monthly costs: Leasing a new car generally has lower monthly costs than purchasing one. This allows you to drive a more expensive car than you would likely be able to afford if you decided to buy.
(2) Fewer maintenance issues: For starters, newer cars have fewer maintenance issues. Moreover, many leases will have built-in maintenance included in the leasing agreement, saving you these regular costs.
(3) Short-term flexibility: If you do not know your long-term car needs, leases can serve as a good option. Entering into a short-term agreement gives you flexibility to change your address, lifestyle, or choices in the years to come.
(4) Depreciation is not a concern: New cars will depreciate in value the minute you drive off of the car lot. This drop-off in value is particularly sharp in the first few years of the new car’s life. Because you are only borrowing the vehicle, this loss in value is not your concern.
(5) New cars and technology: One of the biggest benefits of leasing is that you will be driving newer cars with the latest technologies. Leasing is a good way to ensure that you will be driving the latest and greatest versions.
What Are the Drawbacks of Leasing a Car?
There are certain advantages to leasing a car, but there are drawbacks as well. These include:
(1) It’s not your car: Though cars are depreciating assets, they still possess value. You are simply paying to rent a car for an agreed-upon length of time. Once the contract ends, you will not be left with anything of residual value that you can sell or trade in.
(2) Mileage limits: Many leasing agreements place mileage limits on your driving. Depending on how often you use your leased vehicle, you might run into a cap on the miles you are allowed to drive. Exceeding this limit will cost you, probably by the mile.
(3) Other fees: Your lease might contain additional fees or expenses, especially if you decide to terminate your agreement early. You may also be required to purchase “gap insurance,” which goes above and beyond the standard car insurance.
Is Leasing Right for You?
Leasing can be a good answer for those looking for short-term solutions to their transportation needs.
Whether or not leasing is the best decision for you depends upon your plans and priorities. If you are looking for a long-term fix for your mobility, leasing is probably not the best fit for you. However, if you are seeking a short-term, flexible arrangement, leasing provides advantages over the purchase of a car (either new or used).
In addition, if you place a premium on driving new cars with the latest technologies, leasing is a good option. Especially since you will be trading your car in every few years, leasing can help make sure that you are always driving the most updated makes and models.
However, leasing will also leave you without an asset or value once your agreement ends. If you do decide to purchase the car from your dealer, the overall cost you will pay will be more than if you had bought the car outright to begin with.
Conclusion: Paying for Miles
Cars are depreciating assets, ones that will require increasingly more maintenance as they get older. Eventually, they will stop running, and you will need to find an alternative source of transportation.
Whether you are buying a car or leasing one, you are paying for the ability to move around. Regardless if you drive 1 mile or 10,000, having a car gives you the flexibility to come and go as you please.
At the end of the day, your personal preferences will help you understand which option is the right choice for your transportation needs.
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