Leasing a vehicle is another option compared to taking out a loan for a car or buying it outright. While there are many advantages to leasing a car, there are disadvantages as well. Still, leasing a car is often more affordable than making payments on a vehicle that you own, and after a couple of of years you will not have to be responsible for making repairs, as your lease will be over.
Leasing a vehicle allows you to make payments that are smaller than those required when you purchase a car. Since you are only leasing, or you may want to think of it as a long-term rental of a vehicle for a period of time, you are only paying for it as much as you use it over the time of your lease. The residual value, the amount that the car is going to be worth at the end of the lease, is also deducted upfront from the sum total of the money that you owe on the car.
Assuming that you will be dealing with a separate leasing company from the dealership itself, the leasing company will actually have ownership of the car. Since you are paying them for the use of a vehicle that belongs legally to them, you must maintain the vehicle according to their policies. This can mean general maintenance, oil changes, insurance and how you use the vehicle. If you exceed a certain limit of miles per year, then you will most likely have to pay a penalty, since you are taking away more of the car's value than was agreed upon at the signing of the lease.
A lease contract is much more strict than a financing contract, which happens when you purchase a car. If you sign a lease, and then decide that you want another car before that lease is expired, then you will either be forced to continue driving a car that you do not want or you will be faced with a steep penalty for breaking the contract. On the other hand, if you finance a car and purchase it, and later decide that you want a different car, all you have to do is trade it in or sell it. If your financial situation changes so that you do not have the cash to continue paying for a car that you have financed, then you can simply sell it in order to pay off the balance of the car.
Generally, a lease will put you in a position where you can only average 12,000 miles per year on the vehicle. This may mean that you need to keep track of your mileage in order to figure out ahead of time whether or not you will be able to come in under your mileage quota. This may limit long road trips, vacations or other driving obligations that you may want to consider over the next three years.
According to free legal advice site NOLO.com, it is important to look for a deal that includes "gap insurance" or waives liability for the "gap" when considering a leasing option. This means that if a situation arises where the vehicle is totaled or stolen, the gap insurance will cover you for the difference between what is owed on the lease and what the dealer can recover on the vehicle. This could save you thousands of dollars versus not having the liability waived or insured. Be sure to read all of the fine print before signing a lease and ask questions if you do not understand anything.
