Leasing 101: Is Leasing Really More Expensive Than Financing?
One of the reasons many buyers write off leasing a new car, and instead choose to go the traditional finance route is because they believe it’s vastly more expensive to lease than buy a new car.
And for the most part, they’re right about the fact that it’s more expensive. But they’re wrong about it being vastly more expensive. When you take a look at all of the details of leasing vs. buying, and how each affect overall cost of ownership, you’ll see that it’s not as bad as you may have previously thought.
Here are some core things to keep in mind about the expense of leasing:
Leases Have Extremely Low Interest Rates for Well-Qualified Buyers
If you’ve got great credit, you can often lease a car with much lower interest than if you were to finance it traditionally. And if you’re looking at a car that’s $35,000 or more, that alone could save you thousands over the course of just a few years.
Leasing is Near Worry-Free for Reliability
Most leases are 3-year/36,000-miles. In that short of a time, with that low of miles, most vehicles will still be in great condition. So if you’re simply rotating leases every three years, you’ll never have to deal with the more costly maintenance or risk of costly mechanical failure that many car owners have to go through.
Lease Fees Aren’t Complicated
When leasing a car, there’s typically only one fee on top of any normal fees: the lease acquisition fee. The price of this ranges from lender to lender, but it typically no more than $1,000. Now, at the end of the lease, you may be on the hook if there’s damage to the vehicle that will need to be taken care of before it can be sold.
The Bottom Line
There’s no doubt that traditionally financing a car and driving it for 200,000 miles is the overall cheaper way to buy a new car. But most people in the financial position to own a nice car will want to upgrade to a new model every so often.
Ultimately, that is what has made leasing popular and will continue to make it more and more popular. It’s not for everyone, but in the grand scheme of things it’s also not that much more to lease a new car than it is to buy one.