Nearly every vehicle owner at one time or another has considered the option as to whether they should buy or lease a new vehicle. There are several factors to consider in determining whether you are a good candidate and if it is financially beneficial, but the difficult task for a first time lessee is narrowing it down to what is the primary criterion when it comes to leasing, especially since current research shows that more than 25% of all new cars leaving the dealer’s lot are leased vehicles.
There are several undisputable reasons where leasing versus buying has its merits. Lower monthly payments, higher end model selection, minimal maintenance costs, latest technology, and improved safety features are all the perks that come with a new vehicle. However, in spite of all the positive features just mentioned, the deciding factor that should ultimately lead to a decision according to a recent article published by Jerry Reynolds, the Car Pro, for leasing versus buying, is the number of miles the potential buyer anticipates driving the vehicle per year… 17,500. According to him, that is the magic number, and will certainly be a debatable topic for discussion in the auto leasing industry. Anything less may not be practical depending upon your use of the vehicle, and anything greater may end up costing you in excessive fees.
If you expect to put more than that, then you need to consider purchasing the vehicle and forget about leasing. If you are indeed a low mileage driver then leasing has its benefits. You should not be leasing for more than three years or exceeding the factory warranty, i.e., 24 months or 24,000 miles; because during the term of the lease you are not anticipating any major mechanical or maintenance costs, such as a timing chain replacement, tire replacement, air conditioning repairs, transmission repair, or major engine repairs… just regular maintenance such as required fluid changes, filter replacements, tire rotation, etc. If your lease exceeds the factory warranty any mechanical repairs will come out of your pocket. Should you exceed the allotted mileage as per the lease agreement, then you will be obligated to pay the excess mileage fee that may be as high as 25 cents per mile, depending upon your lease terms.
If you decide to lease, disregard the option to purchase the car at the end of the lease term, as you are clearly defeating your intended purpose of leasing a vehicle. Furthermore, you will end up paying considerably more for the car than if you had purchased it outright. It is also in your best interest to lease from a dealer versus any third-party lease company due to the availability of lower interest options from the factory. Another supporting reason is that third-party lease companies tend to inflate their costs for higher profit margins since they purchased the vehicle from the dealer to begin with (as you are doing) and also may try to entice you to consider a lease term of more than 3 years or exceed the warranty.
Dealers have made leasing so attractive now with our current economy that if you are a back-to-back cycle lessee it results in your being placed back in the market for a new car every three years (or sooner depending upon your lease term), permitting the dealer to increase his inventory purchase from the manufacturer. Current auto statistics indicate that the average car owner who purchased his vehicle has retained it for 5 or more years, depending upon which source you use, thus one can understand the dealer’s push to lease for inventory volume. Dealers would like to see you in their facility as often as possible.
Should you decide to lease, carefully read the lease agreement, be thoroughly familiar with the terminology, and make sure you fully understand your obligations. We’ve all heard horror stories at one time or another regarding victims of leasing. Personally, I am not an advocate of leasing as I enjoy the privilege of car ownership, but for many, it can be their best option. If you know what you’re looking for and can negotiate wisely, then leasing can be a good deal for you.