Is leasing a car a better alternative than buying for families?
In the not too distant past, it was companies that leased cars. It was an easy way to get a tax write-off and ensure executives and employees could tool around town in the latest models.
Today, about one-third of new vehicles are leased rather than purchased. Leasing rather than buying a car might be the best, most affordable option for families as well.
Leasing vs Buying
To begin, here Are 7 reasons why leasing a car can work well for families.
1. Manufacturers’ Incentive Programs Make Leasing More Appealing
For many families, leasing may very well prove to be the least expensive way to have the security of driving a new, fully warrantied car with all the latest safety features and driver’s aids and eliminating the worry of unexpected expensive repairs.
2. Lease payments can be much lower than purchase payments
When you purchase a car, you are responsible for the total cost of the vehicle and taxes and fees. When you lease a car, you are only responsible for the difference between the purchase price and the projected value at the end of the lease.
That means you only pay for the depreciation in the value of the car and tax on that depreciation amount. With a no-money-down lease and low monthly payments, you have more cash flow available for that dream house or tuition bill.
3. You can still take advantage of rebates and deals
Don’t think of leasing a car as a way to avoid negotiating the best deal with the car salesperson. In fact, it might be even more important when you’re leasing because the value of the car at the end of the lease is fixed. Take advantage of all rebates and manufacturers subsidies, just as you would on a purchase.
4. You Won’t Be Burdened by an Old Car at the End of the Lease
If you are in love with the car, you can purchase it for the predetermined value at the end of the lease. If not, you can turn it in, negotiate a new lease and drive away in a new car with the latest safety features, technologies, and fuel economy improvements.
5. Leased Vehicles Carry the Same Warranty as Vehicles You Buy
The difference? The lease will end before the warranty, so you shouldn’t incur any maintenance costs. And, because the leasing company owns the car and will get it back at the end of the lease period and must resell it, most will include regular maintenance at no charge as well.
6. You Have No Risk in Market Shifts During the Term of the Lease
If your lease ends on a hybrid when fuel is cheap or a truck when fuel is expensive, the leasing company absorbs the loss, not you.
7. Your Family Car Can Grow with Your Family
You might lease a cute little Mazda Miata when it’s just the two of you, then lease a Honda Accord when baby makes three, move up to a Chrysler Pacifica when the twins arrive, and choose a Dodge Durango when you have to cart around the teenagers’ garageband, then back to a Miata when the nest is empty.
And Now… 5 Important Reasons Why Leasing Might Not Be Right for Your Family
1. You’re Stuck with the Car for the Full Term of the Lease
You are committed to keeping the car or paying for it until the end of the lease. Lease buyouts are expensive.
2. The Vehicle Must be Kept in Good Condition
This can be a challenge for families with kids that make messes. The leasing company will provide a strict set of criteria that you should review before leasing. On a GM Financial lease, for example, you are allowed 4 dings per panel that are less than 2 inches, 1 dent or 2 scratches less than 4 inches per panel, wheel scratches less than 3 inches, glass cracks and chips less than a ½ inch.
Allowable interior stains must be smaller than 1 inch each. This may make seat protectors, leather or vinyl seats a good investment.
Just as with any financed car, you must provide full coverage insurance at the coverage minimums required by the leasing company.
3. If You Exceed the Agreed-to Total Miles, It Can Get Expensive
You will typically pay 15 to 25 cents per additional mile. That 5,000-mile road trip you did not plan on could be costly. Adding miles is far less expensive if you negotiate them at the beginning of the lease.
4. In General, a Higher Credit Rating is Required for a Lease than a Purchase Loan
Some of the $200-a-month leases you see advertised require qualified applicants to have credit ratings of 750 or more.
5. You Won’t End Up with an Older Car to Hand Down to New Drivers
Given the massive advances in auto safety features in recent years, this may be a good thing.
If You Decide to Give Leasing a Try, Take the Following Steps First…
Do Your Homework
Leasing is new to most people. Take some time to learn the terms and conditions of leasing before going to the dealer. There are many great information sources on leasing online. One of the most comprehensive is LeaseGuide.com. There also is great information at Nerd Wallet and in Edmunds’ 10 Steps to Lease a Car.
How to Get the Best Deal
- Search the manufacturers’ websites for current offers. Remember: Just like buying a car, the advertised lease deal is usually negotiable.
- In spite of the fact that almost one-third of new vehicle acquisitions are leasing, many salespeople are not aware of the current “best offers” and subsidies. Ask to speak to the internet manager, a leasing specialist or the fleet manager.
- Before signing, make sure you understand and are comfortable with every line of your lease contract.
- Do your research, bargain hard and enjoy driving a current, fully warrantied car with all the latest safety and fuel economy improvements. The time you take to do your research will pay dividends over the years. You’ll be driving a car that suits your needs and saving money in the process.
This post was written by John Paskvan, an automotive journalist in Chicago.