The Basics of Automobile Leasing
What is a lease?
The concept of leasing a car is simple: a car is "rented" for typically 24-36 months with low or no downpayment, low monthly payments and low maintenance costs. You don't pay for the full value of the car -- you are essentially paying a rental fee to use the vehicle, and you pay only for the portion of the vehicle's value that you use over the term of the lease.
What are the advantages of leasing?
The biggest advantage is very little money is due up front and monthly payments are often lower than they would be if you purchased the same car. Many dealers will offer full warranties during the length of the lease so mechanical breakdowns are fully covered. Another less obvious savings is a lower sales tax: cars are taxed only on the value used during the length of the lease.
What are the disadvantages of leasing?
While leasing offers short-term savings, at the end of the lease, you don't own the car. Once you start leasing, if you continue leasing, you always have a car payment. In the long run, leasing can be more expensive than purchasing a car if you plan to keep the car. If you prefer to always have a new car, however, this disadvantage becomes a non-issue for you and actually becomes a savings advantage.
Can I lease a car if I drive 25,000 miles a year?
YES! In fact, leases are ideal for consumers who put high miles on their cars and need to have a vehicle that is always in good condition. Most leases limit the number of miles you can drive during the lease but you can "buy" extra miles up front. Finding a lease deal that has a fair price for high miles driven is as simple as asking the dealer, "how can I buy a lease that includes xx,xxx miles?" If the terms sound high, shop around.
Testimonial: Brian, age 39 started buying and then selling his cars every two years so that he could always have a reliable good-looking car. His job required him to take clients to lunch or on sales calls with him. After approximately 6 years of this cycle, rolling his old car loans into new loans, he discovered he was really "upside down" and was $9,000 in the hole. The number of miles he drove every year contributed to the low resale value of his cars. He sold his car for the last time, paid off the $9000, and searched for a lease deal that could accommodate his high-miles requirement and also satisfy his reliability and style needs. Now Brian has a low montly payment that allows him to drive 25,000 miles per year and trade his leased vehicle in every 2 years without ending up "upside down" on car value.
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