Is car leasing right for you?

Leasing, however, can be intimidating and surprisingly expensive if you've never done it before.

But don't worry – we’re here to teach you a few things about buying vs. leasing.

Why lease?

On one hand, there are many reasons to consider a lease, including:

• You want a new and reliable car, but can’t afford to buy one.
• You need a lower monthly payment to fit your budget. (Monthly lease payments can be 30 percent to 60 percent lower than a purchase loan.)
• You don’t have enough money for a big down payment.
• You want to drive a car that reflects your lifestyle. For some, that’s a sports car; for others, it’s an electric vehicle that will be upgraded in a few years with new technology.
• You typically drive no more than 15,000 miles per year.
• You want to avoid maintenance costs. 
• You like the convenience of turning in the car at the end of the lease, thus avoiding the hassle of selling or trading it.
• Or, you expect to keep leasing after the current contract ends. Most dealers give you the option to trade in the vehicle for another lease or to buy the car.

Why not?

On the other hand, there are many reasons you may prefer to buy than to lease your vehicle.

• You like to drive – a lot! Under a lease, you may have to pay 18 to 25 cents for every mile exceeding your annual limit under the contract.
• You want to get out of debt and stop making monthly payments. Leasing a car means you will always have a payment.
• There’s a chance you might return the car before the lease is up. Some dealers charge a hefty termination fee if you break a lease early.
• You can be kind of messy. You must keep a leased vehicle in good condition to avoid extra “wear and tear” charges when you turn it in.
• You want to modify your car. A lease typically prohibits major customizations to the vehicle.
• You prefer the simplicity of a loan. A lease can be packed with surprising fees listed in the fine print of the contract. Some charges may include: A security deposit to protect against default; a destination fee for transporting the vehicle from the factory to the dealership; an early termination fee; and other “drive off” fees such as licensing and taxes.

Understand the lease.

It’s important you know how car leasing works before you step into a dealership. Start by understanding leasing terminology. A quick internet search will provide dozens of sites explaining car leasing vocab.

When you lease, you are essentially renting the vehicle by paying its depreciation while you drive it. But, the dealer still owns the vehicle, and will expect it to be returned in good shape.

The dealer’s interest in the vehicle could make your lease agreement lengthy and complicated. Take time to read the contract, looking for limitations and fees. If you suspect something is not right, ask about it. Some dealers will negotiate certain charges.

Shopping for a vehicle.

The more you shop for a car, the more you learn along the way. Do your research, understand your lifestyle, and learn the terms of lease agreement; if it’s confusing, ask your bank or credit union for help.