Leasing on the Rise, and So Are Costs of Driving
I always thought it made more sense to lease a car than buy one—at least if you drive less than 15,000 miles a year. (Any smaller allowance than that in a lease is ridiculous.) Now, it seems, leasing is coming back as a viable option that more buyers are choosing. It may also be a way to beat the increasingly high costs of driving.
In February, 25 percent of all cars sold were leased, a level not seen since 2005. Honda led in March, with about 33 percent, and Nissan’s leases comprised 29 percent of its sales. The Big Three’s lease sales were in the mid-teens.
Leases offer a bunch of benefits if you can accept their limitations. First, you get a new car every two or three years, with all the latest safety and convenience features. Second, you pay only for what life of the car you use, leaving much more cash in your pocket. Monthly payments are a lot lower than in buying a car. So are insurance costs. You pay a lot less in taxes.
Third, you get a warranty for the full length of the lease. Fourth, and maybe most important, you don’t have to put up with the hassle of selling your used car. You turn it in, or decide to buy it if the price is right. That’s when our DealFinder can help you determine if the buyout option is right for you.
There are some good points here on how to evaluate a lease deal and understand the terms. Online lease calculators are not reliable, unless they include state and local fees. Anything longer than a 36-month lease is probably not in your favor, as costs will outweigh benefits. Read the fine print carefully.
So, why are leases becoming popular again? It’s the economy, stupid, and the loosening of credit. The Detroit News tells us that banks are “lending more freely at historically low interest rates. At the same time, used car values are strong, giving lenders confidence there will be a sound return at resale.”
Another factor, I think, is that the cost of driving is going up, most recently rising 3.4 percent over last year, owing to fuel, tire and depreciation cost increases. Tires, for instance, cost 15.7 percent more than a year ago. In a 36-month lease, however, you probably won’t have to replace tires, saving you some $400-600.
So, there are some ways to beat the high cost of driving.
Have you ever leased a car? What were the most important benefits? Was there any downside?