Deciding to lease or buy a car can be a difficult decision, especially given the inflation of vehicle prices. Given these hefty price tags, it might be tempting to lease a car, as you’re likely to have a lower monthly payment. Although, with purchasing a car, you have the comfort of knowing that at the end of your loan payments, you’ll own your vehicle. That’s why it’s important to consider whether leasing is the right choice for you, and we’re here to help you by covering some of the pros and cons of leasing a vehicle.
What is a Vehicle Lease?
Before we dive into the pros and cons, let’s discuss what a car lease entails. Leasing a vehicle is sort of like leasing an apartment: you make monthly payments in order to borrow property for a specific amount of time. With a lease, you and the owner of the property agree that the assets – in this case, a car – will be returned in good condition. These leases tend to have contractual restrictions, such as the number of miles you can put on the car before paying a surcharge. However, after a two- to three-year term of leasing an automobile, you’re often presented with the option to purchase the vehicle.
Pros of Leasing a Vehicle
The obvious benefit to leasing a vehicle is that you’ll be able to afford to drive a higher-end vehicle for a lower monthly payment. Also, with two- to three-year terms, you can more frequently upgrade your ride. However, there are many other advantages, including:
- Short-Term Cost Savings: Dealerships offer lower down payments, warranties, and free routine maintenance for customers leasing a vehicle.
- Depreciation Protection: Leasing protects you from rapid depreciation. If the market value of your leased vehicle unexpectedly falls, you can usually buy the car at the end of your term for a good price.
- Possibility of Lease Transfer: If you discover you don’t love your leased vehicle, you might be allowed to transfer the agreement to a new driver for the remainder of its term. However, you should ensure your contract enables you to do so. Also, you may incur a transfer fee.
Leasing offers you the ability to opt out of a car you don’t like, or if you love the car, you can purchase it at the end of your lease agreement.
Cons of Leasing a Vehicle
The obvious downside to leasing a vehicle is you don’t own the car, which means you won’t have a trade-in if you decide to purchase a car. You’re also limited in what you can do to the car. Other downsides of leasing a vehicle include:
- Long-Term Expenses: While you’ll be saving money upfront and in the short term, after some time, you may be spending more on the car than you would have if you’d just purchased it. Also, if you decide to break your lease, you could incur some hefty fees.
- Mileage Restriction: Lease agreements provide the number of miles you’re permitted to drive without incurring a penalty. The limit is usually between 12,000 and 15,000 miles.
- Increased Insurance Premiums: The financing entities who lease cars usually require you to have full auto coverage, which includes collision and comprehensive coverage. This will increase your insurance premiums as a result.
Alternatively, your insurance agent can offer gap insurance as an option to cover the difference between the value of your car and the remaining balance owed.
Understanding the pros and cons of leasing a vehicle can provide you with the information you need to make the best decision for your lifestyle. Whatever your choice, it’s important you purchase the right auto insurance to protect your investment. At TJ Woods Insurance, our agents can match you with the best auto policy for your needs. If you’re in the market for better insurance, contact us today.
