If you can’t afford the car of your dreams right now, leasing a car might sound like a great option…until it’s not.
But before you click out of this article with quickness, hear us out first. Here are a few reasons why you might want to reconsider leasing a car and buying one instead:
1. You don’t escape the loss of value.
Whether you buy or lease a car, the second you drive that car off the lot, it depreciates 10 to 20 percent.
The depreciation will be factored into your payments, so don’t think you’re getting an excellent deal by leasing.
2. You don’t own the vehicle.
At the end of your lease, you’ll have to hand over the keys or pay the residual costs to own the car. You don’t get anything when you return the vehicle, pretty much like when you rent a car.
3. Ending a car lease early is costly.
Thought you could just back out of your lease with minimal costs? Nuh-uh. Those dealers and finance companies are going to get their money and then some. You typically will have to pay the balance due plus crazy fees!
Believe it or not, sometimes keeping a lease is even more affordable than breaking it early!
4. You’re still responsible for maintenance.
Leasing a car isn’t like renting an apartment where you can just call up the maintenance man. Be prepared to pay for all maintenance fees on top of your regular payments.
5. There are mileage limits.
Leases come with a mileage limit where you’re penalized if you drive over that set amount, typically 10k, 12k, or 15k miles annually. These limits might not sound bad at first, but they can be a major source of frustration down the line. When your lease is over, you will be required to pay the difference if you went over your mileage limit. These overage penalties can range from $0.05 – $0.25 a mile.
6. High-interest rates
Unlike buying a car, dealerships and finance companies do not have to disclose interest rates on a leased car because a lease is not considered a “debt” since you’re technically renting the vehicle. Experts say the average lease interest rate is around 14 percent. Wow!
According to the finance guy, Dave Ramsey, leasing a car is one of the most expensive ways to operate a vehicle. So if you’re really pressed for a car, buying a used car in cash might be better for your financial future—and pockets.
It’s not worth droppin’ thousands of dollars on a car you won’t own in the end, just to keep up with the Joneses.
“I personally think you should never, ever ever ever, lease a car, do you hear me?” says financial expert, Suze Orman.