Is leasing a Car Waste of Money?
Should I lease a car? Is leasing a car waste of money? Does it make sense to buy the new car than leasing?
Leasing a car waste of money well, these are some questions that boggle down our mind when it comes to leasing a car. After all, owning a car is one of the important financial decisions for most of us. Therefore, it is obvious to ponder over several factors when it comes to leasing a car.
However, once you understand the ins and outs of both leasing and purchasing you can make a comparison to determine the better option for you.
A car’s value depreciates in its first three years, so at least financially, it’s best to buy a car that’s two to three years old. You might prefer leasing a car because you want a new car, or because the monthly payments are lower than the payments on the loan of a new vehicle.
Here we have guide you on how leasing car works so that you can determine if leasing a car waste of money or the right decision.
Understanding Car Lease Payments:
When you lease a vehicle, the dealer will usually need you to make a down payment on the lease. This is called a capital reduction. It is like paying a portion of the lease upfront. Then you will have to pay monthly payments on the remaining lease balance for the span of the lease.
Generally, these payments are lower than they would be if you were buying the vehicle because you’re only financing the portion of the car value that you’ll be utilizing over the 2-4-life years of the lease. The lease will require you to meet to avoid any additional charges at the end of the lease term.
Know about Mileage Limitations:
One important factor to consider is mileage limitation. You can drive the leased car for certain miles as mentioned in the agreement. The mileage limit is often set for years, for example, 10,000 or 15,000 miles per year. If you exceed those limits, you will have to pay a per-mile charge.
Some car leasing services let you buy additional miles up front or negotiate a per-mile rate to pay at lease-end if you exceed set mileage limit.
You are also liable to pay additional charges for damages or worn out tires during your lease period.
What about Maintenance on Leased Cars?
You are required to get your leased vehicle serviced. When you lease is over, you will have the option to buy the car for its residual value by buying out the lease, or you can turn the vehicle in.
You need to get everything in writing regarding maintenance requirements.
Understanding the Benefits of Leasing a Car:
Also, consider the pros and cons of car to determine if leasing a car waste of money or not.
Here are some pros of leasing a car:
- Lower monthly payments than buying the car.
- You can try new model every few years.
- No need to perform major car repairs as leasing company will take care of them.
But there Are Some Cons Too:
- You have to make payment if you continue to lease.
- You end up nothing to show for your money when lease is over.
- Over mileage charges might be imposed
- It’s not easy to get out of car lease without penalty.
Bottom Line: Is Leasing a Car Waste of Money or Not?
So you must have understood the various factors associated with leasing a car. Based on this, here is the answer of the question: Is leasing a car waste of money or not?
First of all, if you are looking to keep the car for only 1-3 years on lower down payments, leasing can work for you. If you plan to drive a new car every 2-3 years, leasing is a suitable option for you. Plus, there is no hassle of reselling it in the market.
The answer to question “Is leasing a car waste of money?” can be YES if you don’t have a stable, predictable income. If you likely to drive on long routes that can exceed set mileage limits, leasing might not be a suitable option for you.