Thinking of Leasing? You May Save Money By Buying That Car!

Cruising in a luxury car for only a few hundred bucks a month persuades many to lease a car instead of buying it. However, there are some things you should know before deciding to lease a car. Leasing has pros and cons that must be considered before jumping blindly into any deal.

Although driving a new car every couple of years is nice, remember that cars depreciate up to 70% during the first 5 years – that means it can be worth thousands of dollars less than what you paid for it. If you lease a car, you absorb the most expensive part of new car ownership, paying for that depreciation, plus interest, but are left with nothing at the end.

But before you get too excited about leasing your dream car, listen to what we have to say. Leasing is not for you if:

  1. You are not sure if you’ll want or be able to keep the car for the term of the lease: Early termination of a lease entails expensive fees and payment for the remaining months of your lease term. If you need to, consider lease trading. But the safest way to make sure you don’t lose thousands of dollars is to not agree to a lease term you think will be too long. The advantage of buying a car is the freedom to sell it anytime. Leasing is a more serious commitment.

  2. Leasing involves more than just financing. Do the math. In certain cases the sum of the monthly payments, interests and insurance rates for a leased vehicle may end up being more than the original car price. But you’ll end up empty-handed when your lease term ends! Make sure you know the true price of a car you want to lease before you go to the dealership, and check out how much it would cost to insure – maybe you can afford to buy it!

  3. You don’t take good care of your car: Anything other than regular wear and tear on your leased auto means an expensive penalty when you turn it in. If you don’t think you’ll be able to properly maintain a leased vehicle, this could cost you a lot of money at the end of the lease term.

  4. You drive more than 10,000 to 15,000 miles a year: This is the mileage allowance on most leases. After that, each additional mile can cost you between 10 and 20 cents. It is possible to purchase additional miles at the time you lease a car, but either way, if you drive more than the typical mileage allowance, it may be cheaper for you to buy the car.

  5. You won’t have money for a down payment at the end of your lease term: Many car lessees fall into a vicious leasing cycle – they end up leasing again just because they don’t have a car to trade in or money for a down payment. It’s very difficult to save money for a down payment on your next car while you’re making a monthly lease payment. In the long run, these people pay a lot more because of the new car depreciation, and are still left without a car they can call their own. It may make sense to take the down payment cash you have now and purchase an auto, even if it’s not that nice new BMW you’ve had your eye on.

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