Advantages and Disadvantages of Leasing a Vehicle

May 25th, 2022 by

Getting a new vehicle is exciting, whether it’s your first car or you’ve had several. But shopping for a new vehicle also comes with some questions and decisions. One of these is whether to lease or buy. Choosing to lease a car comes down to what’s important to you in the vehicle you drive and what you feel comfortable with financially. Before making the decision to lease your next vehicle, it’s helpful to learn about the process. Take a look at some advantages and disadvantages of leasing a vehicle.

What Is the Difference Between Leasing and Buying?

Honda CR-V

Image via Flickr by labnol Licensed CC BY 2.0

Before making the decision to lease or buy, you need to know the difference. When you lease a vehicle, you are essentially signing a long-term rental. Most leases last for 24, 36, or 48 months, and once the lease is up, you return the vehicle to the dealership.

When you buy a car, you generally take out a loan from a bank or another financial institution and use the money to purchase the car. Once you finish making all the payments, the car is yours to keep. Financing terms are usually longer than leases, and your payments include the payment for the car plus interest. It usually takes several years to pay off a loan because you are paying for the entire price of the vehicle instead of just paying for the use of the car.

The Advantages of Leasing

There are several advantages to leasing, especially if you enjoy driving a new car. For instance, there is no upfront sales tax, meaning you don’t have to pay a sales tax on a leased vehicle because you don’t own it. Here are some other advantages of leasing:

You Get the Trouble-Free Years

Newer cars typically have fewer mechanical problems than older cars. When you lease a car for just two or three years, you’ll get the car’s best years.

You Have Lower Car Payments for a New Vehicle

Monthly lease payments are lower than loan payments. A loan payment includes interest and principal, and a lease payment is just a monthly payment that covers the depreciation of the car.

You Can Put Less Money Down

If you do some research, you can often find a lease deal that allows you to get into a car without putting any money down. If you can put a small amount down, you can reduce your monthly payments.

You Have Minimal Repair Costs

If you lease a car for 36 months, your time with the vehicle will typically be covered by the manufacturer’s warranty. Brand new vehicles usually have a bumper-to-bumper warranty, so you will never have to worry about any major repairs.

There Are No Depreciation Worries or Trade-In Hassles

New cars depreciate significantly as soon as they leave the dealership lot. When you lease a vehicle, you don’t have to worry about this because you can bring the car back and get into a new one when the lease is up.

You Always Have a New Car

If you like driving a new car with the latest features and technology, leasing is your best option. You can turn in your leased vehicle for a newer model every two or three years.

Who Benefits From Leasing a Car?

The best candidates for car leasing are drivers who want to get behind the wheel of a new car but don’t want a huge upfront financial commitment. Leasing makes monthly payments more affordable and allows you to always have a newer model vehicle.

A lease is also a good option if you want to get into a higher-end car than you can afford to buy. Since lease payments are lower than car payments, that luxury vehicle you’ve always wanted might be within reach.

The Drawbacks of Leasing

Leasing is an excellent option for many drivers, but it might not suit everyone. One drawback is that when you lease a car, you don’t have the opportunity to build up equity in the vehicle. Here are a few more things to keep in mind before signing a lease agreement:

Mileage Restrictions

Most lease agreements specify the number of miles you can drive. If you go over the limit, you’ll have to pay an excess mileage fee. If you don’t have a long commute to work and don’t drive lots of miles every year, this is not a problem, but if you tend to take road trips every year or commute to work or school, you’ll have to keep an eye on your miles.

Upgrade Restrictions

In most cases, you have to return a leased car in the same condition that it left. This means that you can’t add customizations to your vehicle or change any configurations. If you want aftermarket upgrades, leasing might not be your best option.

Extra Costs

Dealerships expect normal wear and tear from a leased car, but if you are hard on your vehicle, you might have to pay for excess wear and tear. In addition, if you end your lease earlier than the specified terms, you will typically have to pay a cancellation fee.

Leasing Options

When your lease ends, there are some options to consider. If you fall in love with the car you’re leasing, you might have the opportunity to purchase it at the end of the lease, depending on your contract. You’ll want to consider the costs and look at the benefits of buying it, but if you are happy with the performance and don’t want to give the car up, you might not have to.

Other options at the end of a lease include trading in the vehicle for a new lease to start the process over again or returning the leased vehicle. At this point, you can walk away or look at other purchase options.

We’ve laid out the advantages and disadvantages of leasing to help you make an informed decision. Are you considering leasing your next vehicle? If so, stop by Nucar Honda of Norwood in Norwood, Massachusetts, to talk to someone in our sales department and learn about our lease specials. You can browse our inventory, test-drive a new Honda, and find your next ride with us today.