Whenever I see a new car commercial, I am always a little confused at the end. When the cars prices come across the screen, I always wonder what the leasing price means. Growing up, I have never heard of someone leasing a car before—I just thought everyone bought them. With a bit of research, I want to figure out just what all this leasing business is about and if it right for me—and you, too, Millennials!
So What Does Leasing A Vehicle Mean Exactly?
When searching for what exactly leasing a vehicle means, I've come across a lot of helpful—and not so helpful—articles and it all pretty much boils down to this: leasing a car is just like renting a car—just like you do on vacation—but on a long term basis. You still pay a monthly bill towards the car, just like you would with a regular car note. And of course, you still pay fees and interest whenever you are late—so try not to do that. Now I know what it means to lease a car, but I still do not know if it is right for me. I have to break down the pros and cons of leasing and buying and see where I will end up.
The Benefits Of Leasing A New Car
Benefit #1: You want a badass car—without paying as much.
If you love new cars with all of the “fixin's” but you don't necessarily want to pay an arm and a leg for it, leasing may be for you. Why, you ask? Leasing an upgraded car is usually a lot cheaper than buying it outright. You are only paying the difference between the car's price and the expected value of it at the of your lease, which is also known as the car's residual value. One article put it very well: let's say you fall in love with a new car that is worth $30,000. If the residual value is 55% after a 3-year lease, the car would be worth $16,000 when you bring it back to the dealer. During your lease, your payments make up the difference which would be $13,500. That is a crazy good price for a nice car—more than half of the sticker price is taken off!
Benefit #2: You can get a brand new car every 2–3 years.
I like to switch up everything in my life every few years—rather that be moving to a new city, changing up my wardrobe, or starting a new job, I can now change up my car, too! If you have a wandering eye when it comes to cars—like me—this may be a good route for you to take. No puns intended. You will always have the best and newest technology in your car.
Benefit #3: Usually a small down payment.
Leasing a car is great for those who do not have a large down payment saved up. For many, down payments could be $0! If you do not qualify for a down payment, however, you can always negotiate it. Many commercials show lease offers with low payments, but they require a sizeable down payment. If you want to put as little down as possible, remember that your monthly lease payments will be higher.
Benefits of Buying A New Car
Benefit #1: It's Yours!
That's right, it is all yours! So feel free to love it, customize it, dirty it up, sell it, etc.
Benefit #2: Once it is paid off—no more car payments!
Of course, the car is owned by your lender until you finish your monthly payments. But once it is paid off, you no longer have to budget for a car anymore, which I am sure you would absolutely love.
Benefit #3: No mileage restrictions.
This benefit goes well with the first—it is yours—so feel free to go on as many road trips as your little heart desires.
Of course with benefits, comes cons…and I found plenty of them—for leasing AND buying.
Cons Of Leasing A New Car
Con #1: Mileage restrictions can be a huge pain.
One of the benefits of buying your own car is that you can drive your car as much as you want. With leasing a car, you can only drive up to a certain number of miles, usually ranging from 9,000, 12,000 and 15,000 miles a year. Anything after that, and you will be paying some major fees.
Another benefit about buying a car is that, eventually, you will pay the loan off completely, so you can stop putting money towards it. When you lease, you aren't working your way to own your car.
Con #3: Shitty credit? No leasing for you.
Qualifying for a lease is close to impossible if your credit score is anything less than pretty good. If you have anything that you would consider less than good, don't bother to even apply.
Cons Of Buying A New Car
When buying a new car, lenders usually require a 10–20% down payment. So for a car worth $30,000, you are looking at dropping anywhere in between $3,000–$6,000. It can take a while for any average Joe to save that kind of money.
Con #2: Loans can be lengthy to keep them low.
Monthly payments are on your mind when buying a car. So many people often take a longer loan to keep monthly payments which can also mean you end up paying more in interest.
I would love to jump from car to car and a lease would allow me to do that. But I also would love to have a car—that I own—and no longer make payments on it. I am still lost on whether leasing or buying a car is right for me, but hopefully, I helped make sense of those blurred lines that is buying or leasing a new car. Which did you do when you finally bought a car? Tell me in the comments!
Red McCombs Auto Blog:“Should I Buy Or Lease My Vehicle” by Jasmine Watts
U.S. News and World Report: “Buying VS Leasing” by Liz Opsitnik