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Should I lease a car?
Weigh the pros and cons to decide if it's the right option for you.
Leasing continues to be a popular option for many young drivers. If you’re on the fence, start by considering whether the flexibility outweighs its overall high cost.
6 reasons why you may want to lease a car
If you like the sound of these six features, leasing may be for you:
A lease is going to give you the most flexibility with the least hassle. You can change the type and size of your car as your needs change. And the more you lease, the more you save.
Love a manufacturer? You may be able to score a loyalty bonus. Want to change brands? Competitors often offer a conquest bonus to people who switch from a qualified lease. You won’t get nearly as many discounts when you buy.
2. Newest technology
Vehicle technology is updated each model year. Leasing lets you take advantage of changes in infotainment systems, safety regulations and design.
Think about the rise of bluetooth and Wi-Fi hotspots. Only luxury trims had them in the beginning, but now every car comes equipped.
If you want to be part of the next trend, a lease gives you the opportunity — without needing to buy the most tricked-out trim available.
3. Lower monthly payment
It’s no secret that leases are cheaper in the short term. Because you’re only paying for a portion of the car’s ownership and depreciation, you’ll pay less than if you’d financed. This is especially true for luxury cars. The high price point combined with high depreciation make leasing a much more appealing option for drivers seeking an expensive ride.
But don’t forget — leasing will always cost more money in the long run. You should compare the costs between leasing and buying to see which option makes more sense for your preferences and lifestyle.
4. Maximize tax deductions
If you own a business that involves a lot of driving, leasing is the way to go. The IRS allows you to deduct both the depreciation and financing costs for each monthly payment. But the tax deductions are limited for luxury brands, so choose the car you work with wisely.
5. Less maintenance
Many manufacturers offer discounted or free maintenance programs, saving you hundreds of dollars over the life of your lease. Maintenance and repairs cost nearly $0.09 per mile on average, according to AAA’s 2019 breakdown of car costs. If your lease includes free maintenance, this adds up to savings of over $1,350 per year.
Even if yours doesn’t, you’ll still save. Cars require more maintenance and repairs as they age. If you’re switching things up every few years, you won’t have to keep up with rising maintenance costs.
6. Warranty and maintenance coverage
Because a lease will only last two to four years, your car will be covered under the manufacturer’s bumper-to-bumper warranty. This means you won’t be on the hook for any mechanical problems that crop up. Even better, you won’t need to worry about things like extended warranties.
Why leasing may not be the best idea
Leasing is a great choice for some — but it has its fair share of downsides, too:
- More expensive than ever. Leasing a car doesn’t save the same kind of money it used to. Rising costs and lower residual values mean you may be paying more each month — with nothing to show at the end.
- Good credit required. You may not be paying interest on a loan, but you’ll still need good credit to get a low money factor rate.
- Caps on mileage. Leases are typically capped at 15,000 miles per year — and most leases only allow you to drive 10,000 to 12,000 miles annually.
- Excessive fees. Between the acquisition fee, disposition fee and high down payment, you’ll have to hurdle some major upfront costs — not to mention lease-end fees at the end of your contract.
- Penalties for breaking contract. If you need out of your lease, prepare to pay a large penalty fee. Some companies will allow you to swap leases with someone else, but if not, you could be stuck with your contract if you can’t afford to break it.
What should I do if my lease is ending?
Lessees will pay as much as 26% more to lease a vehicle in 2019 than they did in 2016, according to an Edmunds analysis. If your lease is ending this year or early in 2020, consider these options to help save money:
- Extend your lease. If you aren’t sure about leasing or buying, you may be able to extend your lease up to a year to research your options.
- Buy your car. Most lease contracts have a buy-out clause. If you’ve fallen in love with your car, it may be less expensive to commit to it.
- Shop preowned. Manufacturers offer great deals on certified preowned (CPO) vehicles. You’ll avoid the sticker-shock of buying new, while still getting a well-maintained car — usually a former lease.
You can browse more options in our guide to the lease-end process.
If the rising costs and other drawbacks don’t deter you, learn more about car leasing to find out how you can make your next lease as painless as possible. Decide to buy instead? Compare your car loan options to find the best rate available to you.
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