Forty Percent of Online Buyers Unsure on Leasing
An increasing number of Americans are leasing rather than buying their cars, but according to a new survey from BuyingAdvice.com over 40 percent of online car buyers feel that they feel inadequately informed when it comes to deciding whether to lease or buy.
The biggest appeal of a vehicle lease over a purchase is the lower monthly cost, but consumer experts warn against making a simple comparison of monthly payment. The obligations and costs of a lease can make it a much more expensive and potentially risky option for many consumers.
A vehicle lease is essentially a long term rental agreement with an option to either turn in the vehicle at the end of the lease agreement or buy it at a predetermined price. However, the car has to be returned in a specified condition and below a certain mileage to turn it in without attracting significant penalties.
Most experts agree that leasing is primarily advantageous for those who want to drive a new car every couple of years, drive a very predictable amount of miles and are not expecting any major changes in their lives over the period of the lease.
Vehicle leasing can also offer a predictable automobile cost and, by limiting the period of the lease agreement to the length of the manufacturer warranty, allow the driver to always have a car that is under warranty.
If you decide to return your vehicle rather than buy it the end of the lease period your dealer will conduct an inspection to determine the quality of the car when you return it. It is good to make sure all minor repairs and routine maintenance have been conducted prior to this inspection as you will likely to be charged for all needed repairs at the dealership price.
Leases may limit you on where you can conduct routine maintenance and obligate you to maintain records, so be sure to study the terms of your individual agreement and understand what is required of you before signing the contract.
You do have the option of buying your car at the end of the lease at a predetermined “residual value,” but this is an approximation of the expected depreciation made at the beginning of the lease period and may not reflect the market price by the time your contract ends.
It is possible that market conditions will work in your favor, but if you didn’t want to drive a new car every couple of years why were you leasing in the first place? You may want to buy the car if you have exceeded the lease mileage and face penalties but again that leaves you driving an older car.
It is these end of lease penalties that represent the highest risk to potential lessees. Seventy-one percent of our sample said that they regard leasing as more risky than buying a car.
The survey was taken among 1193 users of the BuyingAdvice.com web site who stated they were within 30 days of buying a new car. Seventy-five percent of those who agreed to participate stated that they had never leased a car and 64 percent said that they did not think there were advantages in leasing rather than buying.
Leases are very inflexible and once you sign the contract you are agreeing to make all the lease payments and you do not have the option of selling your car should circumstances change.
Also, leasing a new car means that you are driving the car during its highest period of depreciation and building no equity in the car as you do so, while there are tax advantages for certain consumers, according to personal finance authorities, the lower the interest rates are the more advantageous it is to buy rather than lease.
Leasing is a good option for those who really enjoy having a new car every few years and feel that they are highly unlikely to undergo significant life changes, such as a new job or house, that might substantially impact the number of miles they will drive in a year. However, the further you stray from that profile, the riskier leasing is for you.
