People are discovering the car lease all over again.
That’s a great thing, because it means more new cars are moving off dealer lots, more people are driving nice cars at reduced rates, and the used market benefits from high-quality lease returns. There really aren’t any losers in the car lease world, except the people who lease when they shouldn’t.
The one drawback to leasing? Lease customers never do pay off their cars, meaning they always have a car payment and own nothing at the end of a lease.
For a lot of people, though, that makes sense.
You might be a good candidate for leasing if these 5 things apply:
- You like driving a new car every few years.
- You don’t have a lot of cash to put down but want a nice new car.
- You drive fewer than 15,000 miles per year.
- You’ve had a car payment forever and figure you always will.
- The prospect of expensive repairs scares you.
Figuring out how lease payments are calculated is a complicated process. Much of the equation takes into account the value of used cars, which are unusually high right now because new-car sales fell so much during the recession. Late-model used cars are still in somewhat of a short supply, even though new-car sales have steadily increased over the last three years.
Instead of covering the entire cost of a car, monthly lease payments cover depreciation and taxes only for the length of the lease, typically about 36 months. That means shoppers can afford more car, a big reason luxury cars are leased more often than purchased.
As attractive as lease payments can be, they are not for people who put thousands of miles on their cars every month. Drive 5,000 miles over the contracted 15,000 miles per year allowed and you could be hit with a bill at the end of the lease for 25 cents per mile, or about $1,250.
Stay under the allotted mileage, though, and enjoy the lower payment, smaller amount of cash out, covered maintenance costs (with some brands) and the excitement of another new car coming soon!
Of course, lease contracts are as complicated as they are negotiable, and I’d urge you to do your research and know the vernacular before signing on the dotted line.
Are you a candidate for leasing your next car?