Although
you may be attracted to the benefits of car leasing, you should consider the
following before making a decision:
Do you think there
is a chance you'll want to end your lease early?
Lease contracts are purposely
written to discourage, even prevent, early termination. To do so usually means
you'll pay a termination penalty and all remaining payments. Therefore, if
you lease, you should have a stable lifestyle and good work situation to minimize
the possibility of needing to terminate early. Wanting or needing to end a
lease early is the most common problem people have with leasing.
Do you typically drive
your cars more than 15,000 miles a year?
Lease contracts limit
the number of 
miles
you
can drive to 12,000-15,000 miles per year. If you exceed this limit, you're
slapped with "excess mileage" charges
at the end of the lease. These can be significant for even modest mileage
overages. Sometimes, higher mileage limits-if you know you'll be driving more-can
be "bought" at a lower cost at the time you sign the lease.
Do you mistreat your
cars or fail to keep them in good condition?
Leasing companies require
that you return their car at the end of the lease with no more than "normal"
wear-and-tear. Anything more and you'll pay for the damages. You are responsible
for insurance, upkeep, and maintenance just as with a purchased car. Some
people mistakenly believe the leasing company is responsible.
Do you think you'll
want to customize your car, make modifications, or repaint it?
A leased car doesn't belong
to you, it belongs to the leasing company. Therefore, you cannot make modifications.
If you do, you'll likely be charged for the cost of repairs to undo what you've
done.
Do you prefer "fad"
cars or cars that frequently change style?
These types of cars usually
lose resale value quickly, which means their lease "residual" value is lower.
Low residual value translates into higher monthly lease payments. This kind
of car could easily have a higher monthly lease payment than a more expensive
car with a better resale history.
Are you emotionally
attached to the idea of owning your cars?
When you lease, you never
own the car, unless you choose to buy it at lease-end. This is not all that
different than purchasing with a loan, in which case the bank holds the lien
and you don't own the car until the loan is paid off. Some people like the
idea of being able to "test drive" a car for a couple of years by leasing,
and deciding later about buying the car.
Do you like paying
off your loans and driving your cars until the wheels fall off?
One of the benefits of
leasing is that you can drive a new car every two, three, ore four years.
However, you'll always be making payments. To many people, this is an acceptable
tradeoff considering the benefit of always have a new car that is always under
warranty. And you still have the option to buy at the end of the lease if
you really want to get a respite from those payments.
