Maintenance Issues Aren’t An Issue With Leasing
When you buy a car, you pay off the loan and the car is yours to keep. However, it cannot be ignored that once a car is paid off, it is at least six years of age. At that point, a car will need major maintenance, even if you kept up with all the necessary repairs all along. While a time of having no car payment does sound attractive, you cannot forget that usually, that money will go into repairs. Don’t forget that a vehicle with that much age and mileage becomes less dependable due to wear and tear. So, what is more, important to you, paying a lease payment or sitting in the automotive shop?
Do You Have Good Credit?
Have you seen advertisements for payments as low as $199 a month? Those are all on leased cars. Can you imagine what you would pay for the same car if you purchased it? The payment would probably be double. Leasing is an excellent option for those who have good credit. The APR that is used in purchases doesn’t apply to a lease. So, the dealer cannot raise the APR to counter their risk. In a lease, the lender needs to know that you are going to pay your payment without worry.
Don’t Buy The Whole Pie, Just Buy The Piece You Want!
Think of leasing as going to a restaurant where you only pay for what you eat. Why pay for the whole buffet when you only want a piece of chicken? Well, use that analogy in terms of a lease. Why should you pay for the whole car when you only want to use it for a couple of years? In a lease, you only pay for the portion of the car’s value that you utilize. So, let’s assume that you get a nice SUV that is $40,000. The dealer has estimated the value of the SUV to around $27,000 when you turn it back in. This number is important in two different ways. First, the $27,000 is the amount you will have to pay to purchase the car outright at the end of the lease if you so choose. Secondly, this number is used to figure your monthly payments.
On a car, with a value of $40,000, where the value in three years is expected to be at $27,000, the amount you need to pay is $13,000. The dealer will take that number and divide it up over the number of months you lease the SUV. So, if the lease is for a term of 36 months, which is average, then you would pay $361.00 plus applicable taxes and fees. Now, even with a good credit score, financing a vehicle that is that much on a purchase would cost you around $690. That is with a five percent interest rate and no money down. Can you see the value in leasing now?
The 10,000 Mile Rule
Unless you drive at least 10,000 to 15,000 miles each year, leasing may not be the best option. Consequently, if you drive anything above that amount, then you will have to pay a mileage penalty. Driving less than this amount means that you are paying for depreciation that you are not causing. You are giving that dealership a big bonus when you turn the car in with low mileage. Weigh the costs and the requirements you have for a lease, and you will see that in most cases, leasing just makes good sense.