When it’s time to get a new car, there are several different options for today’s car shopper. While most Americans choose to purchase a car, leasing a vehicle is becoming more popular. Much like a car loan, leasing a car requires a consumer to pay a down payment and make regular monthly payments for several years. Unlike a purchase, however, the vehicle remains the property of the dealership at the end of the payment term.
The purchase of a new car is usually a major investment of money for most people. The majority of Americans will take out a loan to make the purchase, and will make payments for years before fully owning the car. After purchasing the car, however, most people are left with an asset that will slowly depreciate and need to be replaced.
While the conventional financial wisdom has been to purchase a car instead of lease one, there are situations where it can make more sense to lease a vehicle. In general, people buying new will need to buy another one within a few years. For people who trade-in cars frequently, this means that they are paying a lot of money for a vehicle that they cannot sell back to the dealership for the same amount. In many cases, people who trade-in cars frequently will take out a new loan for the purchase price of the new car and the money that is still owed on the last car.
This means that the car payments of someone who frequently trades in their vehicles can be much higher than car lease payments. Since someone who frequently swaps out cars will always have a car payment, it can make sense for someone who does this to pay less every month and lease a car instead. Of course, someone considering this route should carefully look at the terms of the lease. Many leases have restrictions on the number of miles that can be put on a vehicle before the lessee has to pay a penalty. If a driver puts a lot of miles on his or her vehicle, they may not see the savings from leasing a vehicle.
A car lease can also be a good option for someone who only needs a vehicle for a short period of time. Many military members, for example, who are deploying or moving overseas will do better to lease a car than purchase one. By leasing a car or truck, a consumer does not have to deal with the hassles and risks involved with selling a car. The vehicle is simply turned into the dealership at the end of the lease term.
During most car leases, the maintenance of the vehicle is handled by the dealership where the car was leased from. While the lessee is typically responsible for general maintenance such as oil changes and checking tire pressure, the dealership handles all other maintenance issues. While there are a lot of dealerships and auto manufacturers that offer extended warranties, these warranties cost a lot of money and do not cover every part of the vehicle. People who truly do not want to be bothered with car maintenance issues costs could be good candidates for a car lease.
Leasing a new car can be a good option for some people who do not want to be bothered with the hassles of owning a car or who trade-in cars frequently enough that they could save money by paying a lower monthly payment. Anyone who decides to lease a car should carefully consider the terms of the lease they are signing.