The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Are you thinking about getting a new car? Buying a car is a big step. There’s a ton to consider—what type of car do you want? Do you want a newest model? How long do you want to keep your car? You also need to consider things like your lifestyle, how often you travel and more.
If you’re having trouble deciding, there is another option—leasing a car. But how does it work? What happens when you lease a car, exactly? We’ll delve into all the details you know, so you can make the right decision for you.
Leasing a car is a lot like renting one—but for a much longer period of time. When you buy a car, you own it after you’ve made all your monthly payments. But when you lease a car, you’ll make monthly payments, drive it for a set amount of time and give it back to the dealer when your time’s up.
Though leasing isn’t a fit for everyone, it can be convenient and is worth considering. Here are seven reasons leasing a car might be a good option for you.
If you’re the kind of person who likes driving a new car, leasing your vehicle may be a better option than buying one. Cars can wear down quickly, so if you buy a new car, you might owe more than it’s worth after you make the initial purchase.
But if you lease instead of buy, you can continue driving new cars indefinitely—simply trade in your old car lease for a new one every few years. That means you’ll have access to the latest features, like better navigation, back-up cameras or music players. You might even be able to lease an expensive car for an affordable monthly payment. But there is a downside—you’re never quite done paying for leases if you stick with this option.
Traditional car loans usually come with somewhat hefty down payments. But if you lease instead, you’ll likely have a lower down payment than you would with a normal loan. In fact, some dealers may not require a down payment at all.
This means you pay much less up-front for the use of a car. That lets you get a car you might need while potentially putting extra money toward home repairs, a vacation or payments on existing debt.
When you lease, you’ll probably drive a newer car, which can be a safer and more reliable option. The newest cars have the most recent safety features and are compliant with current safety regulations, which older cars might not meet.
Plus, because a newer car has less wear and tear, it’s less likely to break down and leave you stranded on the side of the road. There aren’t any guarantees, but keeping up with maintenance on a vehicle can help keep issues to a minimum.
Speaking of maintenance: Who is responsible for repairs on a leased car?Yes, a newer car often needs fewer repairs. But when issues do come up, repairs will often cost less if you lease your vehicle.
Most of the time, the vehicle you’re leasing will still be covered by the manufacturer’s warranty, so you won’t have to foot the bill for many expensive repairs. There’s also a good chance that basic maintenance, such as oil changes, are covered in your lease agreement or car warranty. Always read the fine print to understand who is responsible for what before you sign a car lease.
When you lease a vehicle, you pay for the vehicle’s depreciation during the lease. When you buy, you’re paying taxes, fees, special finance charges and the full price of the vehicle.
That means monthly lease payments are often lower than loan payments. Obviously, this type of statement can’t be applied across the board, and someone with stellar credit and a valuable trade vehicle might be able to get a loan with lower payments. Always do research to find out where you stand personally before making a big purchase.
Selling a used car can be a hassle. With leasing, you skip it entirely. Instead, you drop the car off with the dealer when the lease is up. Then you’re free to lease a car again or purchase a new one without worrying about trade-in value or an ownership transfer.
If you buy a car, you pay taxes all at once for the full value of the vehicle. When you lease, you pay taxes on your monthly payment and spread that cost out over time. This can result in a lower total tax payment.
Leasing instead of buying comes with some great potential perks. But it’s not an ideal solution for every person. If you decide to lease a car, you there are a few things you need to keep in mind.
Leasing isn’t the same as a normal car loan, but it’s still a form of financing. A dealer will check your credit to make sure you’re eligible for a lease. In fact, you might need a higher credit score to lease than you would need to buy.
If you have a low credit score, you might pay a higher interest rate or be denied financing altogether. It’s always wise to keep an eye on your credit report throughout the year to look for errors or other problems. For the best rates, make sure your credit is in good shape before you apply for any type of financing, including a car lease.
Leases come with mileage limitations. The Federal Reserve notes that average limitations are between 12,000 and 15,000 miles per year. You can pay extra for higher mileage limits, sometimes as high as 100,000 miles annually, but that does significantly affect the cost of the car lease.
Leases require you to keep the vehicle in good condition. If you turn it in with stains, scratches, dents or dings, you’ll have to pay extra charges. Should you lease a car, take good care of it.
Car leases work a lot like other lease agreements. If you terminate your lease early, you might be subject to significant penalties and fees—just like you would be if you broke an apartment lease early.
Lease agreements have strict rules, and if you violate the agreement, you’ll be fined. Modifications will likely violate the warranty or lease terms—even if they’re modifications you consider upgrades, such as shiny new rims or a more powerful sound system.
Leasing can be a good option if you’re comfortable with the limitations in the lease agreement and it makes financial sense. If you’re still on the fence, ask yourself the following questions to determine whether you should lease or buy a car.
When deciding whether leasing or buying a car is better for you, carefully consider all the factors. It’s important to take your own needs and preferences into account to determine which is the most reasonable solution. Research local lease options and check out the auto loans available through Credit.com partners to understand your choices.
October 20, 2020
Auto Loans
July 20, 2020
Auto Loans