What strings are attached to leasing a car?

Question

I am paying on a car I bought now, but I would like to lease a car rather than own it because after about 2 years it's nice to upgrade or change it. I just would like to know what are the pros and cons to leasing. Are there down payments? Any information will be helpful!

Answer 1

A major downside to a lease is that depending on the lease, if they sell the car when you turn it in, for less then the depreciated value, they could end up charging you the difference.   Id watch out for that.

Many car leases these days do guarantee a sale price, so you cant be on the hook for any money.

A second downside is that you own nothing, and you are permanatley saddled with a car payment forever.  Typically, buying a car, you will own it in 5 or 6 years at most.  With a lease, you will have a huge payment, which can be higher then a purchase payment, for an infinite amount of time.    You also do not retain the residual value.

Answer 2

Yes, there is frequently a payment required at signing.

You also may have a mileage restriction--you can only drive the car so many miles over the life of the lease.

You might be required to have the car serviced at the dealership the lease is through.

You are responsible for any damage beyond normal wear and tear; this should be specified in the lease.

Also, with most leases, if you're involved in an accident, it HAS to be repaired. There's none of this "pocket the money and not get it fixed" thing going on.

Hope that helps some!

Answer 3

Insurance premium usually higher when leasing a car.

Answer 4

There are many more positives to Leasing then negatives.  Like you stated, if you are a fan of getting a new car every 2-3 years, then leasing is very good for you.  As far as turning the lease in and then being charged the difference of what they sold it for is called an "Open end lease",  99.9% leases are now "Closed end leases", which means when you turn in the vehicle you just walk away and never look back.  

  Also you hear that when you trade a car in after 2-3 years you have no equity in a lease, which is not necessarily true.  If you were to have recieved a standard loan for 5-6 years then you would not have any equity yet either.  It takes about half your total term to break even, but if you like to trade every 2-3 years than that is of no consequence.  Also if your residual is less than what you can trade it or sell it yourself for then you DO have equity. (Ex. If your residual is 15k and you can sell it yourself for 16k than you pay off the residual of 15k and keep the other 1k).  If when your lease is up you decide that you love that particular car and want to keep it then you just refinance the residual amount and continue on paying on the vehicle for another 3-4 years until (just like buying a car) you own it.  In the end leasing just gives you 3 options compared to just one when buying a car.  

1. Turn the vehicle in and walk away.

2. Sell it yourself and try to make some money on it.

3. Buy it for the residual amount.

   Payments with leases are almost ALWAYS cheaper than buying the car!  You could get a 30k car for the price of a 24k car, which is one of the perks of leasing.  You can get all the gadgets and such that everyone wants.

   I have never heard of having to service your vehicle through the dealership in a lease, but that may be different in other parts of the country.  I do know dealerships throw out incentives to get you to do your service work there.  You are also almost always under warranty with a leased vehicle, which means very rarely do you have to pay any money out of your pocket for service work.  If you are buying a car, then after your new car warranty is out you are on your own, unless you buy a service contract extending the warranty, but that costs an additional 2-3k which equates to anther $50-60 /mo.  

  All the damage above and beyond normal wear and tear you need to fix are things that you would do anyway, driving a nice car.  Like a tear in your leather seat, or a scratch across your door, and most of those repairs are fairly cheap $50-100.

   As far as miles, commonly 12k/yr or 15k/yr is the amount chosen.  If you drive over the amount you choose you do get fined about $.15/mile over.  If you think you drive 12k/yr but want to be safe, just go with the 15k/yr.  It will only raise your monthly payment by a small amount, and you will still be considerably lower /mo in payments than buying.  If you drive ALOT, then purchase extra miles when you first purchase the vehicle.  This is usually done at $.10/mile.  If you were tto purchase an additional 15000 miles that would cost you $1500 and increase your monthly payment, more than likely still lower than buying the vehicle, but when you go to turn the vehicle back in, all the extra miles that you did not use will be refunded back to you.  If you didnt use any of the additional miles you would have a check cut to yourself for $1500.

   When you go into the dealership, have them give you your monthly payments for leasing and buying the vehicle and compare how much you save.

Hope this helps a bit.