The Downside of Leasing
As attractive as a lease may appear, there are a number of disadvantages:
1. Expensive in the Long Run
When you lease, you’re basically paying for the use of the vehicle for the first 2 or 3 years of its life – when the car depreciates the most. When your lease is over, you either have to lease another car or purchase one – either way you’re going to have monthly payments for a long time, whereas if you purchased a car to begin with, you would essentially drive it payment-free after you’ve paid off the loans.
2. Limited Mileage
Most leases have driving limits of between 10,000 and 15,000 miles per year. Anything over this amount will be penalized at a very high rate.
3. High Insurance Cost
Many people are surprised to learn that insuring a leased car can be way more expensivethan they thought. Most leasing companies require you to get a higher level of insurance coverage on the vehicle – usually up to $300,000 in liability coverage. This can make your insurance payments a lot higher than if you had purchased a car instead.
Dealers love leasing because most people don’t understand how it works. There are many ways dealers can pad their profits when you lease a car. Unless you’re extremely careful and thorough, you could end up paying a lot more than you should.
5. Hard to Cancel
Leasing is like signing a rental agreement. You can’t just walk away from it – there are stiff penalties if you do. If you purchased a vehicle instead, you could always sell it if you don’t want it anymore. With a lease, it’s practically impossible to terminate, although there are some options available.
6. Requires Good Credit
If you have bad credit, don’t even think about leasing. Overall financing costs during a lease are always higher than a loan because you never pay off any principal. Besides, most leasing companies require you to have a decent level of credit and a stable financial situation.
7. Lots of Fees
There are many fees associated with leasing that you won’t find anywhere else. In order to lease, you’ll need to pay an acquisition fee of at least $400, and a disposition fee of at least $200 at the end of the lease. In addition, there are an assortment of excessive “wear and tear” fees that you could be liable for when you turn in the vehicle. Leasing companies are notorious for charging high fees for small dings and scratches – so you need to be extra careful taking care of the vehicle as you drive.
8. No Customizations
If you like customizing your vehicle, forget about it. At the end of a lease, you need to return the vehicle in the same condition and configuration as you received it. This means no engine modifications, paint, or accessories such as spoilers.