Ins and Outs of Leasing
Leasing is a popular alternative to ownership because monthly lease payments often are lower than monthly car payments. And leasing is a short-term prospect so you can get a more current car under manufacturer’s warranty more frequently. But unless you purchase the car at the end of the lease period, you won’t own the car. Buying it at the end of a lease may be more costly than if you simply had purchased it at the beginning.
Before you lease a car, consider:
- You may be subject to additional charges at the end of the lease for wear and tear, mileage over the specified amount in your lease agreement, and the difference between the car’s market value and residual value.
- You may pay a penalty if you want to terminate the lease agreement early.
- If you wish to purchase at the end of the lease, the purchase price may end up being more than the car is worth.
Leasing a car can shield you from repair and maintenance costs, although this may be offset by higher insurance premiums. If you use the car for business purposes, you can write off the lease payments.
If you lease a car, you may opt for gap insurance, which usually is rolled into the lease agreement. This provides coverage for what the insurance will cover and what you still owe on the lease if the car is damaged beyond repair.