Leasing a car has a lot of perks.
You enjoy lower monthly payments, a lower down payment and you may be able to drive a more expensive car for less dollars each month than you would if you were buying. You have fewer repair costs since with a three-year lease, a car’s factory warranty is likely to cover most of the repairs.
However, you have limited mileage with a lease, often 12,000 to 15,000 miles per year, so leasing may not make sense if you have a long commute to and from work each weekday.
And, end a lease early and you’ll be hit with a big penalty so it’s smart to look at your budget and your car driving needs carefully before signing a lease.
The biggest disadvantage of leasing is at the end of the lease you don’t own the car. You have spent three years making payments on a car and have no equity to show for it.
And if you need a car at the end of a lease, you’ll likely end up leasing again. So another three years of car payments is on your horizon.
Leasing is a good option if you have a short-term need of a car and you don’t want to deal with the hassle of buying and selling a car in such a short time frame.
And if you prefer to drive new cars, and are likely to sell or trade in a car every 3 years anyway, you may want to consider leasing your next set of wheels instead of buying.
Because a car dealer will check your credit score prior to approving you for a lease, it’s important to know and monitor your credit score before you apply.
You can check two of your credit scores for free every month on Credit.com. You also will receive customized tips from experts on improving your credit score.
Prior to leasing a car is also a good time to check your credit report and correct any errors. The best leasing deals are reserved for customers with good or excellent credit, and you don’t want an error on your credit report standing in the way of the leasing deal that you deserve.
You can request a free annual credit report from each of the three major credit reporting agencies, Equifax, Experian and TransUnion.