Is leasing a car worth it?
We get asked this question frequently but aren't sure exactly what the client means.
Is leasing worth what? What is IT? Is leasing worth DOING?
We think what is being asked is whether the option of leasing a car is worth considering versus the option of buying with a loan or using hard earned cash — the familiar lease-versus-buy question — and whether the benefits of leasing are worth whatever disadvantages it might have.
It’s a good question and deserves a good answer.
What is the main benefit of leasing a car?
Most people would agree that the primary benefit of leasing a car is, well, low monthly payments. In fact, lease payments are about HALF of loan payments for the same car, same term, same everything. This makes leasing a car much more affordable than buying for those on a limited monthly budget.
Of course there are other benefits as well, including low company car tax, no initial payment (in some cases), new car every 2-4 years, car covered by manufacturer’s warranty, and no used-car sell/trade hassle with the burden of depreciation.
What would make leasing not worth doing?
Given all the benefits, leasing may not be worth the cost and problems it could cause if any of the following conditions exist:
You drive more than your contractual mileage. You will be charged for any extra miles over your total allowance, which could be a substantial amount of money if it’s a large number of miles.
You don’t usually take proper care of your cars. If a leased vehicle is returned with excessive scratches, dents, doors hanging off, accident damage, broken or chipped glass, or worn-out tires, you will be charged to correct those issues. The vehicle must be maintained regularly and kept in good condition as specified by the manufacturer.
You will want to modify your leased vehicle. A leased vehicle must be returned at lease-end with the same equipment and same configuration as it had at the beginning of a lease. Removing, adding, or modifying equipment is not allowed. You will be charged for correcting any such problems after you have returned the vehicle at the end of the lease.
You will want to end your lease early. If your lifestyle may cause you to need to end your lease before its normal termination date, it could be very troublesome and expensive. The cost would likely be much more than might be expected.
Summary
Car leasing is only “worth it” if you like fixed monthly payments, like having a brand new car every few years, keep your cars in good condition, and will not want to end your lease before your contract is satisfied.