Leasing a Car: Why It’s a Bad Deal

Leasing a car may sound like an affordable and easy way to get behind the wheel of a new car, but it’s generally not the best deal for you the consumer. Find out why.

The Sales Pitch

You’ve no doubt seen those tantalizingly low lease offers advertised on TV and in the newspaper. You’ve maybe even considered taking advantage of one of them. It just sounds so great—you can pay less per month than if you were to buy, and still drive the same vehicle. How can you not win with a deal like that? Well, unfortunately there are several ways in which you won’t come out a winner. Here’s a look at the downside of leasing:

-The monthly payments on a lease may be less than what you would pay on a car loan, but there’s a big catch—at the end of the lease period you won’t own that car. Compare the price to lease to the price to own and it’s often only about $100 difference between the two.

-If the vehicle is totaled in an accident or stolen, you’ll still be responsible for the full lease amount—even if your insurance company gives you less than what you owe. You can purchase gap insurance to cover the difference, but that’s an extra expense to add to your monthly budget.

-If you put more mileage on the vehicle than is outlined in your lease contract, you’ll have to pay a penalty. This is usually handled on a per mile basis, and can be quite high.

-If you cause any damage to the vehicle during the time that you have it, you’ll have to pay for the repairs.

-If your finances change to where you can no longer afford the vehicle, you’ll still be responsible for making the payments. You can give it back to the lease company; but if you do they’ll simply auction it off for a low price, and hold you responsible for paying the difference—even though you no longer have the vehicle! In some instances, they may even charge you a penalty for returning the vehicle early.

-You’ll have a monthly car payment for as long as you continue to lease cars. With a car loan you can make payments for five years (or whatever the length of your car loan is) and then scratch car payments from your budget.

-If you lease your vehicle, you won’t be able to count your car among your assets—somebody else will be able to count it among theirs.

-When you lease you won’t be able to make any modifications to personalize your vehicle. You’ll have to keep the car as somebody else wants it.

-If you later decide to purchase the vehicle from the lease company, you’ll pay more than if you had bought the vehicle from a dealership—considerably more.

Forgo that Lease

The next time you hear a seemingly good offer on a car lease, remind yourself of all of the downsides to leasing. You can be sure that nobody at the dealership will.

~Erin Huffstetler

Erin Huffstetler, a freelance writer specializing in frugal living tips and tricks. Her work has been featured in numerous print and electronic publications including, Family Circle, Parents, Pregnancy, Guideposts for Kids, Sweet 16 and Girls' Life.