Car leasing has unique benefits and downsides, advantages and disadvantages, pros and cons — when compared to buying a car with a loan or with cash.
The primary attractions of leasing are lower monthly payments and always having a new car with full manufacturer’s warranty every few years. However for people who drive more than an average amount of miles and prefer long-term ownership, without continuous payments, leasing may not provide benefits.
Let’s look at the details now.
PROs of Car Leasing
- Monthly payments are 30%-60% less than loan payments for the same car, same term
- Car is always under warranty, assuming lease term doesn’t exceed warranty period
- Down payment is optional and often not required
- Built in GAP protection, usually free with lease
- Avoids used car hassles at end of lease
- Have option to purchase car at end of lease or return it
- Reduces sales tax burden (in most states)
CONs of Car Leasing
- Fixed mileage allowance, suitable for low or average mileage drivers. Per mile fee if exceeded
- Acquisition fee up front, unique to leasing
- Disposition fee at end of lease if car returned, unique to leasing
- Low lease payments usually do not build ownership value in the leased vehicle
- Normal wear and tear allowed, but excessive wear and unrepaired damage results in lease-end charge
- Modifications to leased vehicle not allowed
- First month’s payment required up front, not month later as with loan