So you're thinking about getting a new car. You've always bought your automobiles outright. Yet, you've heard good things about leasing. Is that the route you should take?
Maybe. Maybe not. If you're accustomed to owning your car, you may find leasing a strange experience. Careful study may lead you to conclude that it's not for you at all.
On the other hand, at least for some people, there are definite advantages to leasing.
Some of the pros and cons:
* Initial price. All else being equal, it costs less to lease a car than it does to buy one. This is particularly true now that the interest on car loans is no longer tax deductible. As a result, you are able to drive a bigger or better or faster car than you might otherwise be able to afford.
On the downside, when you lease, you own nothing at the end of the lease period -- and may face hefty charges if you've dinged and scraped the car a bit.
* COST. Here the distinction narrows somewhat. The long-term costs of leasing, as measured by the per-mile cost over the time you have the car, are about the same as when you buy. If at the end of the lease period you choose to buy the vehicle, the cost of leasing is actually higher.
* FREEDOM. Leasing deals are often quite complicated. They may include certain items of maintenance that give the deal at least the appearance of being all-inclusive. This can be to your advantage or your disadvantage. It can lock you into one place for service, perhaps at a higher overall cost than work you could obtain elsewhere. Lease agreements must be read carefully and signed only if you are comfortable with those arrangements. Remember, too, that there are penalties involved if you break the lease. And it is more difficult to unload a lease you don't want than it is to sell a car you've decided you don't like.
To some extent, leasing is speculation as well. Remember the cars of the early 1970s? They were big, their engines were huge, and they drank a lot of then-cheap gasoline. When gas prices skyrocketed, the value of these big machines plummeted. It became possible to buy a relatively new luxury car at a low price. But keeping it fed was very expensive. Fluctuations in oil prices, changes in environmental laws and the like are difficult to predict. When you buy a car, those problems are your problems. When you lease, they are, to some extent, somebody else's problem. You can walk away at the end of the lease period.
* DRIVING HABITS. You should consider your driving habits as well. To what use will you put the vehicle?
A person who travels a great deal by car, for instance, is likely to find leasing an expensive option because there are substantial mileage charges attached to any driving beyond a certain amount, typically 15,000 miles per year. If you regularly exceed the annual allowance, your costs can skyrocket.
Conversely, if you take extremely good care of your car, drive it only a little and treat it like a fine piece of machinery rather than a disposable product, you are not likely to benefit under a leasing arrangement. You receive no credit for returning a car that's practically new at the end of the lease period. If you customarily keep a car for many years, then you should buy rather than lease. That way, you will benefit from your efforts.
It can be argued that someone who takes extremely good care of a car could lease and then, at the end of the lease period, buy the car outright. While this is true, it costs more than buying the car in the first place.
If you are someone who usually keeps a car for three years or so before trading it in on a new model, if you drive 15,000 miles or so in a year, and if you take good but not great care of your car -- in short, if you are average in your driving habits -- then leasing could be for you.