Since time immemorial, business owners have asked the “lease or buy” question when deciding how best to acquire new industrial equipment. Nowadays that riddle has come to the world of finance, specifically automobile financing. Is it smarter to buy a car than to lease one? Does leasing ever make sense? What are the catches with lease contracts? Unless you have a net worth like Floyd Mayweather, these are important questions for you to answer.
Those questions are all sub-divisions of the primary lease/buy conundrum that continues to haunt consumers who seek to get the car of their dreams without paying too much for it. The arguments about leases, including arcane pros and cons that can be discussed long into the night, are too numerous to be listed in a 1,000-page, small-print book. They are summarized below:
Leasing Has Lots of Advocates
The advantages of leasing are numerous. When you lease a car, you will likely be able to drive a vehicle that you would not be able to afford if you were merely buying. That’s because lease rates tend to be significantly lower than monthly payments would be on a given car.
When you lease, you’re getting access to a newer car that is virtually hassle-free. Most leases come with no-cost oil changes and routine maintenance, which means you’ll always be driving a car that is in top shape. Plus, you’ll never have to wonder about the car’s trade-in value or worry about selling it when the lease is up. All those standard hassles of ownership are gone. When it’s time to get another car, all you have to do is take the vehicle to the dealership and turn it in. No worries, no selling, no headaches. Leasing can be trouble-free and is a good option for people who worry about breakdowns and unpredictable repair costs.
What Can Go Wrong When You Lease?
It’s not so much what can go wrong, as what is wrong about leasing. For starters, you’ll usually be paying more than if you borrowed money to purchase the same car. That’s just a fact of life when it comes to leasing. You will always have a monthly car payment if you simply move from one lease to the next. You’ll never have the option to own a car and avoid monthly payments. And when you are driving your leased car, you’ll have to keep an eye on the odometer. That’s because lease contracts tend to be strict about mile limits. If you exceed the stated limits, penalties can be quite costly.
When you return the car to the dealership after the lease period is up, you might be liable for “wear and tear” charges if the car is not in top shape. Anything out of the ordinary can lead to a fee when you return a leased car. Things like small dings or dents, scratches or any minor damage to the upholstery can lead to a hefty charge. Finally, if you want to end a lease contract early, be ready to pay more fees. These charges are called “early termination” fees and they are substantial. In fact, they are so high that very few people ever terminate lease contracts early.