Auto Leasing Pros & Cons

A car dealership will often offer a customer the choice to purchase or lease a car. With a car lease, the customer receives the right to operate the vehicle for several years while making payments on it. At the end of the lease term, the customer may decide to purchase the vehicle or return it and buy or lease a new car. Both a purchase and a lease have advantages and disadvantages.

Convenience

One advantage of an auto lease is that it allows the car buyer to avoid getting stuck with an older vehicle that is difficult to sell. A buyer who purchases a more expensive car may still want to buy a new car in five years, so the buyer will have to sell or trade in the old car. With an auto lease, the buyer can simply return the vehicle and let the dealer worry about selling the used car.

Lease Conditions

A car lease places conditions on the buyer. It often restricts the number of miles the driver may drive the car each year. According to the Federal Reserve, a typical mileage limit is 12,000 to 15,000 miles per year. The driver must also maintain the vehicle in good condition, which includes following the automaker's recommended schedule for oil changes and maintenance, or the driver must pay additional charges at the dealership when returning the car.

Monthly Payments

One advantage of leasing a car is that it is cheaper than purchasing a car. Since the lease payments are typically lower than the purchase payments on a new car, the buyer can either make smaller payments or drive a fancier vehicle for the same price. A lease only requires a buyer to pay a portion of the car's full value, but a purchase requires the buyer to pay the entire principal value of the car upfront or over a period of time.

Ownership Advantages

A benefit of a purchase is that once a car buyer purchases a car, the car buyer owns the car. The car driver can drive the car an unlimited amount of miles in a year. The car driver can also delay maintenance, get into accidents and cause additional damage to the car without incurring any additional liabilities to the dealership. A car buyer who plans to keep the car for more than a few years usually saves money by purchasing the car outright.

Down Payment

A disadvantage of a car purchase is that it often requires a large down payment to avoid high interest charges. A lease will still require a down payment, but it will be smaller than the down payment for a purchase. A customer may not qualify for a loan to purchase a vehicle, yet qualify to lease the same vehicle.