- There are many different reasons a consumer may choose to lease a car instead of buying one. First and foremost, a monthly lease payment is usually significantly lower than a monthly car loan payment. In addition, some consumers prefer a short-term commitment over a long-term responsibility. People also may opt to lease a vehicle simply because they want to upgrade to a new car every few years. Basically, when you need a car but don't want to own a car, leasing a vehicle may be your best option.
- When you lease a car you are essentially borrowing the car from a leasing agency for a period of time, usually 3 years. The dealership sells the car to a leasing agency and receives a commission for the new customer. The customer then makes lease payments to the leasing agency.
- It doesn't matter if you purchase a vehicle or lease a vehicle--the depreciation remains the same. You will lose 20 percent of the car's value the second you drive it off the showroom floor. However, when you lease a vehicle you will be paying the leasing company the proposed depreciation value. For example, say you decide to lease a car that costs $40,000 and the leasing agency expects the car to be worth $25,000 at the end of your lease agreement; your monthly payments will be geared toward paying the $15,000 difference. Your monthly payment will also include a finance charge, (which is determined by your FICO score and credit history).
- When your lease expires, you will usually have one of three choices. You can buy the car outright at a predetermined price, lease a new car and begin a new lease agreement, or turn the car in to the leasing agency and just walk away.
- You will be responsible for significant scratches, dings and any excessive wear and tear of the vehicle. In addition, you are given a predetermined mileage limit when you lease a new vehicle, so if you exceed the allotted limit, you will be responsible for paying for each additional mile. (The average cost is 12 to 15 cents per mile). If you decide to end your lease early you will also face penalties. (See Resources)
