While vehicle leasing offers advantages that can be attractive for buyers, it’s not for everyone. In this article we’ll look at some pros and cons to leasing a vehicle.
Advantages Of Leasing
- Less Worry About Maintenance – When you choose to lease a vehicle, you’ll be able to rest knowing that the vehicle is covered by a manufacturer’s warranty. There are some companies that offer packages that will cover scheduled maintenance for the vehicle. For instance, Ford offers their Ford Maintenance Protection Plan (FMPP). Ford and BMW also have a coverage for Wear Care, which waives excessive wear and tear under $4,000 (conditions apply).
- Lower Monthly Payments – Since you’re only paying for the depreciation on the vehicle, your monthly payments will be lower. You aren’t paying any extra to build equity in the vehicle.
- Lower Tax – In most states and in Canada, you don’t pay sales tax on the entire purchase price of the vehicle. You’re only taxed on the depreciated value of the vehicle and that’s spread out in the payments over the term of your lease.
- Lower Up Front Payments – When leasing a vehicle you shouldn’t have to put any money down (except your first monthly payment on delivery). That makes getting into a new vehicle more affordable.
- No Down Payment – Vehicle leasing gives you the flexibility of not needing to make a down payment. You’ll still need to pay any licensing fees and the first monthly payment when you pick up your vehicle.
- No Used Car Hassle – When shopping for vehicles, we tend to look at used cars as an option. The problem with used vehicles is that you have no idea how the previous owner treated the vehicle. Did they get all scheduled maintenance done? Were they a heavy footed driver?
Disadvantages Of Leasing
- Early Termination Cost – If you have a change of heart on the vehicle or your circumstances change, the cost to terminate early can be high. While you can list your vehicle on a site like Lease Busters, there is no guarantee that someone will be willing to take over the lease on your vehicle.
- Excessive Mileage Charges – When you choose to lease a vehicle, the number of allowable miles is outlined in the contract. If you go over your mileage allowance you’ll be charged. Typically at a rate of $0.12 per kilometer, but that number depends on the brand of vehicle you’ve purchased. So assuming your contract says $0.12/km and you go over your allowance by 20,000 kilometers you’re looking at a bill of $2,400 at the end of your lease.
- Excessive Wear and Tear – If you return your vehicle at the end of the lease with excessive damage (think dents, scratches and unrepaired damage) you will be charged to have it fixed. Ensure you get any major damage repaired before you return the vehicle.
- Higher Insurance – Leasing companies typically require full coverage on the vehicle. Your insurance costs may be higher, especially if you generally only carry the minimum liability. You’ll need to have collision and comprehensive coverage which will increase your rates.
Summary
While leasing does offer benefits in comparison to traditional financing, the benefits should be weighed against the disadvantages. You should weigh the pros and cons while looking at your current and future expected lifestyle when making the choice to lease.
