There is a lot of advice available online about leasing a car. Some say that it is fine under certain circumstances, but most of this advice says to steer clear of leasing. The frustrating part is that many of these critics don’t say why leasing a car is such a bad idea. Here are seven key reasons that will show you exactly why you should never lease a car.
You owe money while you own nothing
When you lease, you have absolutely no ownership in the vehicle. The lease is secured by the car you drive, but you have no collateral for the loan because you don’t actually own the vehicle. You will work hard to make money and pay for the lease, but in the end you will have nothing to show for it. You might as well be putting that money away to save for a new car that you will be able to buy with your own money later.
Few options in the future
You may think that leasing a car will be similar to leasing a house or an apartment, where you will pay a monthly fee that you agree to at the beginning of each lease term. This, however, is not true. Car leases are much more like loans in that you will be required to pay the full remaining balance of the lease at any point in the term. Most agreements will allow you to get out of the lease before the end time you had agreed on, but you will probably still have to pay a high penalty.
Once you have signed the lease, there is really no way to get out of it without paying a hefty fee. These fees are only in place to keep you from trying to get out of the deal so that the car dealer can make as much money as possible. Some dealers will charge you fees even if you go through with the lease until the term period is over. All of these restrictions and fees leave very few options for the customer signing the lease, though they may not realize it at the time. With the state of our national economy and the uncertainty of our financial future, it really isn’t wise to bind ourselves to a financial agreement with such little flexibility.
Liability for payments
If you get into an accident and the car is totaled, you are still required to pay back the full amount you agreed to in the lease contract. Your insurance company may give you back less than the amount you owe the dealership, but you will still be responsible for everything.
Also, if you should lose your job or have an unexpected financial emergency, you may not be able to afford your lease payments anymore. The dealership usually will not have sympathy for customers in these situations. They will recover the car and sell it in auction. If the car sells for less than you owe, you will still be responsible for the remaining amount.
Requirements and fees
Contracts for leasing agreements come with mileage limits, and if you go over a certain number of miles, you will be charged extra for every mile that you put on the car. You should also take maintenance fees into account when considering a lease. If you return the car, and it is in a condition beyond normal wear and tear, the dealer will charge you another fee. This type of fee is especially hard to predict because every person’s idea of “normal” will be different.
There are other also variables that could affect how much you will need to drive the car. What if, during your lease term, you decide to leave your current job, with a relatively short commute, and take on a job that requires you to drive over 100 miles a day? There is no way to know for sure how many miles you will need to use over the next few years.
Nothing to sell or trade when you need to buy your next car
At the end of your lease term, you will lose the car completely. This will leave you without an asset to trade or sell for a down payment on your next vehicle purchase. Not only will you lose this asset, but you will also have to pay termination fees as well as possibly paying mileage and maintenance charges. Therefore, not only will you have no extra money for your next vehicle purchase, you will also probably have to spend more money to get yourself out of the original deal.
Stress and complexity
Buying a car is very simple. You make the money; you save the money; you spend the money to buy a car. At that point, you can start again by saving for your next vehicle. By the time you need a new car, you should have enough money saved up to buy one. When you buy a car outright, there is really no added stress or frustration.
Leasing a car, on the other hand, is very complex. When you agree to a leasing contract, you are accepting a bunch of terms that you may not completely understand, and you are assuming that you will have a stable financial future. You will also have to worry about exceeding your mileage limit, maintaining the car so that it is in perfect condition when you return it, and you will have to face the possibility of other costs at the end of the lease.
For all of these reasons, and more, it will usually be a better option to buy a decent used car or a lower priced new car. With both of these options, you will be able to continue with your life as soon as the car is paid off, and you will then have something to sell or trade for a down payment on your next car. You will feel a lot less stressed, and you won’t have to worry about having a costly experience with your dealer later.