Should you purchase or lease your next car? The right answer depends on several factors.
Many people I have spoken to have never considered leasing as a good option for them. The idea that they would be spending money on something that they will never actually own just doesn’t sound appealing. But there are some advantages to leasing that need to be understood in order to make an informed decision.
First off, leasing allows you to get into a brand new car with all of the latest technology and safety features for a lower monthly payment. You are basically only paying for the depreciation of the car over the course of the lease term and there is a guaranteed “residual value” at the end of the lease. At that time, you can choose to either purchase the car or turn it back into the dealer with no penalties, as long as there is no damage or excessive mileage accrued (more on that later.)
Second, leasing allows you to upgrade your vehicle every few years at a lower cost than with financing. This can be a huge advantage for young people who might be transitioning from being single, to married with kids. The car they buy today may not be the best size or type for their lifestyle a few years from now. Leasing means they can move from a compact car or SUV into a larger SUV or minivan as their needs change and their lifestyle evolves.
So what are the disadvantages of leasing? The first perceived disadvantage is that you will never own your vehicle outright. This sense of ownership is very important to a lot of people. If you want to modify your vehicle, leasing probably isn’t the best option either.
Anyone who drives a lot of miles (more than 15,000 miles per year) probably isn’t a good candidate for leasing. The number of miles allowed is determined by the lease terms and going over the limit will result in additional fees (usually around 15 to 20 cents per mile.) Higher mileage lease terms may be available, but the economic benefits diminish as the monthly lease payment will be higher.
Leasing may not be the best option for those who don’t tend to keep their cars in good cosmetic shape. Interior or body damage will result in additional fees being charged when you turn the car back in. Minor dings and scratches aren’t usually a big deal, but you will get charged for the cost to repair large dents or other damage.
So should you purchase or lease? If you like driving newer vehicles, keep your cars in good shape, and think you might want to upgrade in the next few years, leasing could be the least expensive option. If you drive a lot of miles, and tend to keep your vehicles for a long time, then traditional financing is probably the way to go.
Clarity Automotive Group is your personal “Car Buying Advocate.” We assist our clients with navigating the complicated and often frustrating process of buying vehicles. We are based in Billings, Montana and also serve the surrounding areas of Bozeman, Miles City, Helena, Great Falls, and Lewistown, as well as Cody, Lovell, and Sheridan, Wyoming.