Leasing a vehicle can seem like an attractive option, mostly because the payments always seem to be lower than those for buying. When you lease a vehicle you do not own it; you are liable for any damage that occurs during the lease period that is not covered by insurance and you have restrictions on the use of the vehicle. But some people prefer leasing because they can get into a new vehicle every three years with lower payments than owning.
Payments
The payments on a lease are different than a loan because you are only paying the depreciation value of the vehicle in a lease. If you are looking at a $10,000 car that is estimated to be worth $6,000 after three years, then you would be financing the $4,000 difference instead of the whole $10,000. Your monthly payment would include interest and any fees that you did not pay at closing. That is why leasing payments are lower than buying. The difference is that if you were to finance the $10,000 for 36 months and buy the car outright, you would own it when the term is over. When a lease term is over, you either have to turn the car in, or pay the rest of the value of the vehicle. In our example, if you turned the vehicle in after 36 months you would have to pay the $6,000 you did not pay initially along with interest and fees. So, in the end, a lease can cost you a lot more if you want to buy the car. But if you have no intentions on purchasing the vehicle when the lease is up, then you can save money each month.
Charges and Fees
A lease does not mean the price of the car is non-negotiable. Do not let a car sales person convince you that because you are leasing the price is set in stone. Negotiate the final price of the car before you sign lease papers. Look at the fees the dealership charges when putting together a lease. Some fees, such as the standard delivery fee and taxes, are expected. But if you do not pay attention then the sales person could add on extra fees and attribute them to the lease. Ask for a detailed description of each fee you are being charged; if you are not comfortable with a fee, then take the contract to a lawyer and have it explained to you.
Leasing Versus Buying
If you drive a lot and want to drive your vehicle out of state then leasing may not be for you. One of thee aspects of a lease that can make it an unattractive option is the restrictions put on your ability to drive your vehicle. Most leases state that if you drive more than 15,000 miles per year then you will have to pay for every extra mile. For a 36 month lease that means no more than 45,000 miles for the term of the lease. The per mile fees can range anywhere from a few cents a mile to over a dollar a mile. Read those conditions and understand them before you sign the lease. Most leases will also prevent you from being able to drive your vehicle out of state. If you get in an accident out of state in your leased vehicle, then you may not only face problems with your insurance company, who could choose not to cover the damage, but you would also be violating your lease and could cause the dealership to penalize or even sue you. Your lease may also come with a clause that charges you if you turn in the car before the lease period is up. All of these conditions are not part of an agreement when you buy a car, so make sure leasing is for you before you get involved in it.
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