Some prefer leasing cars rather than buying. Leasing allows you to get a new vehicle every few years, and you can typically lease a more expensive car than what you can afford, and for a low monthly payment. The dealer performs all maintenance free of charge on leased vehicles, as long as the vehicle has regular oil changes. While leasing sounds ideal, it does have disadvantages.
Payment
You always have a payment while you are leasing. You have an option to get another lease once your current lease ends, usually after three years. If you purchase a car, you typically make payments for five or six years, after which you own the vehicle.
Penalties
If you return the car before the end of the lease, you will pay a penalty for early termination. If you go over the maximum amount of miles allowed in your contract, the penalty can be costly. Damage to the leased car, such as scratches, can result in additional penalties. Some minor damages are often difficult to avoid, however.
Final Value
There are two types of leases: open-end and closed-end. With open-end contract, your lease will have a large balloon payment at the end, including all the extra depreciation. This means that you owe much more for the vehicle than it's currently worth. With a closed-end contract, you are not responsible for paying the final value of the car at the end of your lease.
Additional Expenses
It is recommended to purchase GAP coverage, which will cover the payment if the vehicle is damaged in an accident or stolen. Leasing companies may require you to carry a larger liability limit insurance.
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