You certainly get more car, but is it worth it?
When it comes to buying a new car most people choose between leasing and buying. The merits of financing a new car or leasing one have been debated endlessly, and now we're going to take a crack at it. Arguing in favor of leasing a new car is Jared Rosenholtz, while Michael Hines will fight for buying the car (via financing). Both sides have their merits but in the end only one can win. Well, at least here anyway. Check out both their arguments and let us know who you side with in the comments section.
Leasing a car certainly has its advantages. Chief among which is getting a new car every two to three years. If you like to have the latest and greatest car, leasing is easily the most affordable way to achieve that goal. Your repair bills will be very small (the factory warranty will cover most repairs) and you will actually pay less per month. With leasing, you can decide to purchase the car for a predetermined price, or trade it and get another one. When you purchase a car, it makes more sense to drive it into the ground. That means you will probably have to worry about dumping money into it towards the end of its life. You will also have to worry more about the car's depreciation and how much you will be able to eventually sell it for.
With leasing, you are only paying for the initial depreciation on the vehicle. This calculation is pretty complex, but it essentially means that you will be paying way less per month. For example, a BMW 328i priced at $39,345 would be $662 per month for 60 months with $2,500 down. Or you could pay just $463 per month on a 36 month lease. The BMW is not even the greatest example of how leasing is cheaper. Do some searching and you can find many models that have really good lease specials. You could lease a Lexus IS200 for as low as $200 per month. You would be lucky to finance a Hyundai Elantra for that price! That is why you might want to consider leasing. Hell, leasing is even a great way to get into the wildly unaffordable car of you dreams!
If you ever wondered how many people can afford to drive exotic cars, leasing may be a factor. A Huracan can be leased for around $2,500 a month. You may have to put $20,000 down, but that is pittance to enjoy the best 36 months of your life! All told, you might spend around $110,000 to drive a Lamborghini for three years. Not exactly cheap, but much more doable than the $228,000 MSRP. You will probably be restricted to 2,500 miles per year, but you will be the coolest person on the block!
Some of the standout lease deals Edmunds found for March 2016 are pretty damn good. A lot of them include $0 due at signing and payments as low as $139/month. That sounds great, but take a closer look at the details in the chart Edmunds compiled and you’ll immediately see the downsides to leasing a car. There are mileage limits, with some as draconian as 10,000/year (Jeep Renegade Sport 4x4). You could also get charged a disposition fee by the leasing company for cleaning and selling the car when the agreement ends. Then there’s the mileage overage fee (0.25 cents at the highest) and the down payment that will be wasted money if you choose not to buy the car at the end.
Of course these factors can change with your credit rating and some are imposed by region. Still, there are a lot of rules to play by and all the money you spend could do nothing but bump your credit score. In addition to throwing money away you’re handcuffed in terms of what you can do with your car. The average American drives a bit more than 13,000 miles a year, so you’d better pay close attention to your odometer. If you modify your car make sure you can return it to stock once the agreement ends. Leasing makes sense in only a few extreme cases. If you’re smart and lucky you can make money on your lease. If you want an ultra-luxury car or a supercar then leasing can also make sense.
Case in point: a 2016 Bentley Continental GT at San Francisco’s British Motor Car Distributors. Putting $14,504 down and paying $1,995/month (plus taxes) is all it takes to get you into this badass luxury convertible. Of course you can only drive 5,000 miles a year but you’d save a bundle over buying the car outright. If you really want a car you should probably wait until you can afford to finance one on terms you’re comfortable with. If you really want a Bentley or Lamborghini, then by all means lease.