![]() If your goal is to have low monthly payments and drive a new vehicle every few years with little hassle, then leasing may be worth the additional cost. But then you end up financing both the new car and the remainder of your old car. If you can’t pay off the difference on an upside-down loan, you can often roll the amount you still owe into a new loan. Taking out long-term loans and trading in early will leave you paying so much in finance charges compared with principal that you’d be better off leasing. If you need to get rid of the car early on or if it’s destroyed or stolen, the trade-in, resale, or insurance value is likely to be less than you still owe.īuying a car with a loan isn’t the way to go if you want to drive a new car every couple of years. Longer loans make it easy to get “ upside down”-when you owe more than the vehicle is worth-and stay that way for a long time. But long loans can be risky, and these buyers might find leasing to be a better option. Some car buyers opt for longer-term car loans of six to eight years to get a lower monthly payment. You may have to pay a fee when you turn in the vehicle at the end of the lease.You’re still on the hook for expendable items such as tires, which can be more expensive to replace on a better-equipped vehicle with premium wheels.With a few exceptions, such as professional window tinting, you need to bring the car back in “as it left the showroom” condition, minus usual wear and tear, and configured like it was when you leased it.Those charges could equal the amount of the lease for its entire term. You will probably be stuck with thousands of dollars in early termination fees and penalties if you get out of a lease early-and they’ll all be due at once. If you decide that you don’t like the car or if you can’t afford the payments, it might cost you.So if your kids are apt to go wild with markers or you’re a magnet for parking lot dents and dings, be prepared to pay extra. ![]() If you don’t maintain the vehicle in good condition, you’ll have to pay excess wear-and-tear charges when you turn it in.So be sure to calculate how much you plan to drive. That can range from 10 cents to as much as 50 cents for every additional mile. If you go over that limit, you’ll have to pay an excess mileage penalty. Lease contracts specify a limited number of miles.Over the long term, the cheapest way to drive is to buy a car and keep it until it’s uneconomical to repair. By contrast, the longer you keep a vehicle after the loan is paid off, the more value you get out of it. If you lease one car after another, monthly payments go on forever.In the end, leasing usually costs you more than an equivalent loan because you’re paying for the car during the time when it is most rapidly depreciating.At the end, you just drop off the car at the dealer.Īs attractive as a lease may appear, there are a number of disadvantages.There could be significant tax advantages for business owners.You don’t have to worry about fluctuations in the car’s trade-in value or go through the hassle of selling it when it’s time to move on.Your vehicle will have the latest active safety features.You can drive a higher-priced, better-equipped vehicle than you might otherwise be able to afford.The lease may even include free oil changes and other scheduled maintenance.You’re always driving a late-model vehicle that’s usually covered by the manufacturer’s new-car warranty.You drive the car during its most trouble-free years. ![]() Instead, you’re just borrowing and repaying the difference between the car’s value when new and the car’s residual-its expected value when the lease ends-plus finance charges. Monthly payments are usually lower because you’re not paying back any principal. On the surface, leasing can be more appealing than buying. To find out whether leasing or buying is right for you, we take a look at the pros and cons. However, life can be unpredictable, and a lease has less flexibility than a purchase. The predictability of the payments and ownership costs (no expensive repairs when under warranty!) has its appeal. Quite the opposite: They might find that they don’t use the miles they have paid for. With many people working from home, the mileage restrictions on a lease might not be a factor for a lot of shoppers. That payment is often less than the monthly cost of financing a new vehicle, but buyers must return the car at the end of the lease term. With a lease, buyers make a monthly payment to drive a new car for a set term. However, according to Experian, one of the credit reporting agencies, the percentage of all new vehicles that are leased was down in the third quarter of 2022 when compared with both 20. As car prices remain high ( more than $48,800 in June 2023), leasing a new vehicle remains an alternative.
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