You are trying to decide whether you should buy a car or lease one. You feel a newer pre-owned car fits your budget, but is leasing a new car the best idea? You’ve heard monthly leasing payments are cheaper than buying, but are they really? Here are some surprising things you might not know about why leasing is a bad idea.
Repairs Are Still on You
Whether you lease or buy a car, any repair work is typically your expense. When leasing, the responsibility of all repairs not covered under warranty fall on you. You cannot make any permanent modifications to the vehicle, such as customized paint work. Also, any damages to the interior or exterior are assessed at the end of your lease and added to your final bill, payable when you turn in the car
Events Outside Your Control
What happens if I have an accident in a leased car? If you should have an accident that totals your leased vehicle, what you owe does not change. If your insurance company pays less for the vehicle than the amount you owe on the remainder of the lease, you will still have to pay the difference to make up the total cost of the lease you agreed upon.
Likewise, if you suddenly find you can no longer afford the monthly payments, the car will be sold and you will owe the difference in the total cost of the lease.
Mileage Restrictions
In your lease contract, there will be a leasing mileage limit set for you. This is typically 36,000 miles for a 3-year lease, which is 12,000 miles per year. Any miles you put on the car over that limit will be assessed a penalty you’ll pay at the end of the lease.
Hidden Fees
What you won’t see until you are ready to sign on the dotted line are all the hidden fees put into a lease agreement. These include fees, such as disposition fees, acquisition fees, destination charges and sometimes a mysterious category called “other fees.” Then, if you decide to purchase the car at the end of the lease, you’ll have purchase option fees, tire and documentation fees. And let’s not forget the penalties for damages or for going over the leasing mileage limit.
Getting off the Merry-go-round
Once you are stuck in the leasing cycle, you may find it difficult to get out of it until your contract is completed. Even then, the dealer may try to re-negotiate a new lease or attempt to persuade you into buying the vehicle. If you choose to purchase the car at the end of the lease, you will end up paying much more than the car’s original value versus financing it from the beginning. Since your lease payments, added in with hidden fees, end up being comparable with the monthly payments you’d have with financing a newer pre-owned vehicle, you may find you’ll be better off with ownership.
