This a hot take – but I’m going to give you 10 reasons not to lease a car. Now don’t get me wrong, I will help a customer if they are hell bent on getting a lease with or without me, but I honestly will probably need a lot of convincing because typically, I will steer most every consumer I run into away from leasing a vehicle.
Leasing can look pretty attractive with offers for lower monthly payments and the allure of driving a new car every few years. However, if you’re asking me, leasing isn’t the right choice for most people. If you’re a business owner, my thoughts vary on the matter as there can be tax benefits when leasing. Since consumers will do as they please, I want you to have all the information you need if you do choose to lease.
If you’re asking yourself, is leasing a car a good idea? Let’s get to my 10 reasons not to lease a car.
Leasing contracts often come with mileage restrictions, and exceeding these limits can result in costly penalties. If you have a long commute or enjoy taking road trips, leasing is not providing any flexibility in those departments. Imagine driving home with a shiny new lease to then feel like you need to park it in the driveway the last year to six months because you’ve gone way over on miles. You’d definitely need to be sure you know your driving habits and have a good estimate of the mileage needed before committing to a lease.
Unlike purchasing a vehicle, leasing does not result in ownership at the end of the contract. This means you may not have any equity in the car and will need to return it to the dealership at the end of the lease term. See number three.
When you finance a vehicle purchase, each payment contributes to building equity in the car. With leasing, your payments only cover the vehicle’s depreciation, so you won’t have any equity to show for your investment.
The problem with leasing is that you’re not in control of the asset so if there is equity in the vehicle at the end of the lease a lot of the leasing companies require you to sell the vehicle back to the same manufacturer. The fact that you’re leasing they won’t let you sell the vehicle for the same price as your option to buy it.
They control the asset and they don’t allow you to just sell it to just anybody or any manufacturer– to access your equity. It’s about control.
There may be equity and what should you do if there is equity – well you might be constrained in who you can sell that vehicle to. The leasing company doesn’t allow you to just sell it to anybody and they may require you to sell it back to a dealership of the same manufacturer so it gives you less places to shop it. So if it’s a Honda you have to sell it back to Honda.
In addition to mileage restrictions, leasing contracts may include fees for excess wear and tear. Minor dings and scratches that would be acceptable on a purchased vehicle can incur charges when leasing. Chip or ding the paint? Chaa-ching $$$ – you’ll owe on that when you turn it back in.
When you lease a car, you’re essentially paying for the vehicle’s depreciation over the lease term. This can result in higher overall costs compared to purchasing a vehicle, especially if the car depreciates quickly. You essentially pay for 50% of the total cost of the vehicle over the first three years.
Lease agreements typically prohibit significant modifications to the vehicle, such as aftermarket upgrades or alterations. If you enjoy customizing your vehicle to suit your preferences, leasing may not be the best choice for you. You get what you get.
While leasing often offers lower monthly payments compared to financing a purchase, the long-term costs can add up. After multiple lease cycles, you’ll find yourself paying more than if you had purchased a vehicle outright. If you follow any of my content you will often hear me talk about the total cost of a deal – not simply sale price, not just trade-in, not just financing- it’s the entire deal that matters. What’s the total number. This same concept applies when looking at a lease. Think about it in terms of the total cost to drive the vehicle for the lease term.
Lease contracts typically last for two to three years, during which time you’re committed to the terms of the agreement. If your circumstances change unexpectedly, with a life event like a job relocation, family addition, an injury or even a new marriage, you may find yourself stuck in a lease that no longer meets your needs or your family needs.
Lease agreements often require higher levels of insurance coverage compared to financing a purchase. This can result in higher insurance premiums, adding to the overall cost of leasing. This can go for purchases too. You should always check with your insurance agent before purchasing a new vehicle to find out the cost to insure. With certain models and years, the cost to insure can increase from your current vehicle. If you don’t know this ahead of time, you may exceed a budget goal and not find out until you walk into the finance office. That’s not a good place to be. Do your research up front.
When your lease term expires, you’ll need to return the vehicle to the dealership in good condition and pay any end-of-lease fees or charges. Failure to meet these obligations can result in additional expenses and headaches.
While leasing can be a convenient option for some drivers, it’s essential to weigh the potential drawbacks before making a decision. By considering these 10 reasons not to lease a car I hope you’ll make aan informed choice that aligns with your needs and preferences.
If you still want to do a lease this is what I recommend:
There are certain situations especially for business owners who might write off the total cost of the lease or people that like clock-work every three years like to turn in a car. Or people who buy vehicles and then tend to trade them in every three or so years. In these scenarios, I might say, “OK let us help find and negotiate a lease for you.”
I am rarely going to recommend leasing a vehicle but in very specific situations where a CPA or a financial advisor is recommending my clients to lease. Then I will I be on board with it.
For everyone else, I will tell you that you 99% of the time leasing a car is a bad idea. You would be much better off buying a vehicle. I’m with Dave Ramsey on this one – your best not to lease a car.
If you are going to do a lease you still need to contact multiple dealerships and have them competing against each other to give you the best lease deal. There are three parts of the deal. And It’s basically a finance contract so you’ve got to negotiate everything separately. The overall lease deal is negotiated the same way as is done on a purchase. You have to contact multiple dealers.
If you’ve got more questions, comment below and we’ll try to get them answered!
Introduction As a business owner, choosing whether to lease or buy a car for your company is a decision with financial implications. …
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