Car Buying

Leasing a Car: When Is Leasing a Good Idea?

RELATED READING
RESEARCH BY MAKE
Toyota cars, trucks and SUVs Ford cars, trucks and SUVs Honda cars, trucks and SUVs Chevrolet cars, trucks and SUVs Jeep cars, trucks and SUVs Nissan cars, trucks and SUVs Lexus cars, trucks and SUVs Volkswagen cars, trucks and SUVs BMW cars, trucks and SUVs
Acura cars, trucks and SUVs Alfa Romeo cars, trucks and SUVs AMC cars, trucks and SUVs Aston Martin cars, trucks and SUVs Audi cars, trucks and SUVs Bentley cars, trucks and SUVs BMW cars, trucks and SUVs Bugatti cars, trucks and SUVs Buick cars, trucks and SUVs Cadillac cars, trucks and SUVs Chevrolet cars, trucks and SUVs Chrysler cars, trucks and SUVs Daewoo cars, trucks and SUVs Datsun cars, trucks and SUVs DeLorean cars, trucks and SUVs Dodge cars, trucks and SUVs Eagle cars, trucks and SUVs Ferrari cars, trucks and SUVs FIAT cars, trucks and SUVs Fisker cars, trucks and SUVs Ford cars, trucks and SUVs Freightliner cars, trucks and SUVs Genesis cars, trucks and SUVs Geo cars, trucks and SUVs GMC cars, trucks and SUVs Honda cars, trucks and SUVs HUMMER cars, trucks and SUVs Hyundai cars, trucks and SUVs INFINITI cars, trucks and SUVs Isuzu cars, trucks and SUVs Jaguar cars, trucks and SUVs Jeep cars, trucks and SUVs Kia cars, trucks and SUVs Lamborghini cars, trucks and SUVs Land Rover cars, trucks and SUVs Lexus cars, trucks and SUVs Lincoln cars, trucks and SUVs Lotus cars, trucks and SUVs Maserati cars, trucks and SUVs Maybach cars, trucks and SUVs Mazda cars, trucks and SUVs McLaren cars, trucks and SUVs Mercedes-Benz cars, trucks and SUVs Mercury cars, trucks and SUVs MINI cars, trucks and SUVs Mitsubishi cars, trucks and SUVs Nissan cars, trucks and SUVs Oldsmobile cars, trucks and SUVs Plymouth cars, trucks and SUVs Pontiac cars, trucks and SUVs Porsche cars, trucks and SUVs RAM cars, trucks and SUVs Rolls-Royce cars, trucks and SUVs Saab cars, trucks and SUVs Saturn cars, trucks and SUVs Scion cars, trucks and SUVs smart cars, trucks and SUVs SRT cars, trucks and SUVs Subaru cars, trucks and SUVs Suzuki cars, trucks and SUVs Tesla cars, trucks and SUVs Toyota cars, trucks and SUVs Volkswagen cars, trucks and SUVs Volvo cars, trucks and SUVs Yugo cars, trucks and SUVs
RESEARCH BY STYLE
AWD/4WD
Commercial
Convertible
Coupe
Hatchback
Hybrid/Electric
Luxury
Sedan
SUV/Crossover
Truck
Van/Minivan
Wagon

author photo by Colin Ryan May 2015

If you're interested in getting a new car, you're probably well aware that you have two basic options: leasing or buying. While most drivers choose to buy (or finance) a new car, many shoppers swear that leasing a car is the better decision. So which is correct? When does leasing make more sense than buying? And should you consider it? To help you decide whether leasing is a good idea for you, we've rounded up all the benefits and drawbacks of leasing, and we've laid out our opinions about when you should lease and when you should buy.

Benefits of Leasing

The biggest benefit of leasing a car rather than buying is that you can usually get more car for your money by leasing. A lease involves paying the depreciation on the car rather than the entire purchase price. For example, if you lease a $20,000 car for 3 years and its projected value at the end of those 3 years is $12,000, then you only make lease payments on the $8,000 difference. If you had bought the car, you'd be making payments on the entire $20,000.

Leasing also benefits drivers who don't have much money saved up for a down payment. Many lease deals are available with nothing down or $1,000 down, whereas smart shoppers who finance usually put down 10 to 20 percent of a car's purchase price.

There's also the obvious benefit of leasing: You get a new car every few years. If you sign a 5-year loan to purchase a car, you'll be making payments for the next five years, and if you want out, you'll have to sell the car yourself, which can take time, or trade it in for a new model, which can be expensive. If you're leasing a car, your obligation is released as soon as the lease is over, which usually happens every 2 or 3 years, and you'll be free to go get a new model.

Drawbacks of Leasing

The biggest drawback of leasing is that you aren't building up any equity in your vehicle. Think of it like buying a home: With every mortgage payment, you own a little more of your home. But if you rent your home, just like if you lease a car, your money isn't increasing your ownership stake. As a result, when someone has finished making payments on a leased car, he or she will have to buy or lease another car. When someone has finished making payments on a financed car, he or she owns the vehicle outright with no further payments.

Another drawback to leasing is that many leases often come with a mileage restriction. In order to get many good lease deals that are offered by automakers, you'll need to agree to keep your miles low -- usually around 10,000 or 12,000 per year. If you can't do that, the lease rate will go up, or you'll be stuck paying expensive mileage penalties at the end of your lease.

Drivers who lease will also have to take very good care of their leased cars. Automakers assume that leased cars will be returned in roughly "new-car" condition, and they can charge you for excess wear and tear if a leased car is returned with scrapes, bumps and dents.

Is It a Good Idea for You?

So is leasing a good idea for you? Our answer is that it depends. We primarily suggest leasing for drivers who enjoy trying out new cars, who don't drive very much and who keep their cars in good shape. We also suggest leasing if you don't have a substantial down payment saved up. Meanwhile, if you don't need a new car every few years, if you drive a lot or if you want to own your car for a while, you'll probably be better off buying instead.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Leasing a Car: When Is Leasing a Good Idea? - Autotrader