Is Leasing a Car Ever a Good Idea
Ask around and most people will probably tell you never to lease a car. Their cautious words may have an element of truth to them, since most of the time, it isn’t worth it to lease as opposed to paying for a car in cash, or financing one.
Like most pieces of “common knowledge” this one doesn’t necessarily ring true for every single situation. Here are a few times that leasing a car might be the best route to take (if you can afford it):
You Don’t Mind the Prospect of Never Gaining Equity
Leasing a car is sort of like a long-term car rental, but at a much lower daily rate. When you rent a car, you are paying the rental company money for the temporary use of the vehicle, at the end of the agreement, you give the car back. Leases are sort of the same way but at the end of your agreement (two or three years) you have the option to purchase the car at a lower price than normal.
Even in the best case scenario, the car will rarely be worth more than your buyout figure. If you do decide to purchase it and can’t come up with the entire lump sum, you will have to finance it, adding fees and interest to what you ultimately end up paying.
You Don’t Drive More than 10,000 Miles a Year
Every lease comes with a certain amount of miles you can drive in a year, usually this is around 10,000 miles. The penalty for going over that amount would be specified in your lease agreement, but it’s commonly around 10 cents per mile over the yearly allotment. This can be a lot of money if you do go over, especially if you go over by a substantial amount.
If you know that you will keep yourself under the mileage limit, you can at least consider leasing. For those who know that they would definitely go over, leasing is probably out of the question from a cost-efficiency standpoint.
You Want an Upgrade Every 2-3 Years
One of the main reasons people lease cars is because they like the idea of being able to upgrade fairly often. Some people like to hold on to their cars for a decade or more, allowing them to get the most out of the original purchase price. Others do not mind the ever-present car payment, but still appreciate that they have the option to purchase the car at the end of the lease.
Upgrading so quickly usually means that you will not have mechanical issues with your vehicle, which you might experience several of with an older car after several years and 150,000+ miles.
Your Net-worth/Income is Relatively High
A constant car payment is usually much less of an issue to someone who makes a lot of money as opposed to someone whose car payment equals 15% of their take home income. Once that car payment goes away, a lot of money is freed up for other things. For those with a lot of disposable income, the comfort and convenience of a leased car might be worth it, especially if they do not want money tied up in vehicles.