Leasing, or renting, a car comes with plenty of perks. You can enjoy lower monthly payments, a lower down payment, and you may be able to drive a more expensive car for fewer dollars each month than you would if you bought one. You’ll also have fewer repair costs with a three-year lease since a car’s factory warranty is likely to cover most of the repairs.
However, it’s important to be aware of the drawbacks of leasing, as it isn’t for everyone. In this article, we’ll go over some of these along with the advantages of leasing so you have a good idea of whether leasing is the right move for you.
What Are the Drawbacks to Leasing a Car?
With leasing, you have limited mileage, which can often be 12,000 to 15,000 miles per year. Leasing may not make sense if you have a long commute to and from work each weekday, nor is it a good idea if you tend to put a lot of wear and tear on your car. If this sounds like you, leasing may not be the best route.
Another thing to keep in mind is that if you end a lease early, you’ll be hit with a big penalty, so it’s smart to look at your budget and your car driving needs carefully. If you’re living check to check or barely able to make ends meet, taking these costs into consideration will be a major priority for you.
The biggest disadvantage of leasing is that at the end of the lease you won’t own the car. You’ll have spent three years making payments on a car with 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. Another three years of car payments could be on the horizon — can you afford it?
What Are the Advantages to Leasing a Car?
Leasing is a good option if you have a short-term need for a car and don’t want to deal with the hassle of buying and selling a car in such a short time frame. If you prefer to drive new cars and are likely to sell or trade in a car every three years anyway, you may want to consider leasing your next set of wheels.
How Does My Credit Affect My Ability to Lease a Car?
A car dealer checks your credit score prior to approving a lease, so it’s a good idea to know — and monitor — your credit score before you apply. (You can view two of your credit scores for free, updated every 14 days, on Credit.com. Another option is to pull your free credit reports from each of the three major reporting agencies — Experian, Equifax and TransUnion — at AnnualCreditReport.com.) Checking your credit scores will not harm them in any way and is a great way to keep tabs on your finances, which can affect your ability to lease a car.
Prior to leasing a car is a good time to check your credit report and correct any errors. After all, you don’t want to leave anything on your report that could drag down your score. Remember, the best leasing deals are reserved for customers with good or excellent credit, so don’t let an error on your credit report stand in the way of the leasing deal that you deserve.
This article has been updated. It was originally published August 21, 2014.