To Lease or To Buy

To Lease or To Buy a New Vehicle

Other than a home, a vehicle is the largest purchase you are likely to make in your lifetime. You will probably spend significant time in research before choosing the right car to fit your unique needs. First, you have to decide whether to buy your vehicle new or used. Then, if you decide that a brand-new vehicle is right for you, the next question is whether to buy or lease it.

When you buy a car, it is yours. When you lease a car, you are paying to drive the dealership's car. Although lease payments are lower than loan payments, you need to keep in mind that you will have no equity after the vehicle lease has ended. Leasing instead of buying does allow you to always drive a brand-new car, which is a selling point for some consumers. You can drive your leased vehicle for two or three years, then exchange it for the newest model. Depending on your budget, needs, and wants, a lease may be the best option for you.

Pointers for Those Looking to Lease a Vehicle

Although you're not purchasing it, you can still negotiate the price of your vehicle, and thus lower your monthly payment. An online lease calculator can give you an estimate of what your payment will be.
Ask the dealer about fees for extra mileage, vehicle wear, and early termination of your lease. Typical leases allow you to put about 12,000 miles on the vehicle per year. For each additional mile, you could be charged up to 25 cents per mile—or more. That small dent on the door and stained upholstery could also cost you quite a bit. And if you need to end your lease early, expect to pay a hefty fine.
Be aware of closed-end and open-end leases. After a closed-end lease, you simply return the car, unless you have to pay for excessive mileage or extra wear and tear. After an open-end lease, you pay the difference between the value stated in your contract and the appraised value of the vehicle at the end of the lease.
Find out about any lease inception fees, which can add up to quite a bit. These may include a down payment, an acquisition fee, a security deposit, the first month's payment, taxes, and title fees. Some of these fees can be negotiated.
Be sure that the manufacturer's warranty will cover the car for the time and mileage that you'll be leasing it.
Take the contract home to review it before signing anything. This will remove any pressure the dealer may be putting on you, and allow you to carefully read all the fine print.
Federal law states that dealers must provide lease cost information before a lease is signed. Print out this form and ask your dealer to complete it. If the dealer refuses, you may want to take your business elsewhere.