As we already covered, a car lease is a rental agreement to drive a car and return it at a certain time. Usually there is also a purchase option in a lease agreement, so if you want to keep the car you can buy it outright or finance the remainder into a loan.
Despite the title, leases can be good for some limited situations.
If you just need a car for a relatively-short period of time, leases are great! Are you from the east coast and going to college o the west coast? A lease may be a good option. leases can also be good for foreign nationals who are only in the country for a limited period of time.
However, most people don’t fall into these situations. In fact, when I worked in auto finance a LOT of the lease customers probably shouldn’t have been in leases.
Did you know dealers make more money when you lease a new car vs. buying it?
So dealers will try to make a lease sound as appealing as possible.
“The car will still be under warranty, so you wont have to worry about paying for any upkeep!”
“This is the best way to make sure you have the newest safety features to keep your family safe!”
“Your monthly payments will be lower!”
The first a third statements are technically true, but aren’t as good as they sound.
Remember: dealers don’t make any money if you don’t buy (or lease) the car, which means they will tell you *anything* to make the sale in most cases. True, some dealers aren’t crooks, but most either are or just don’t have the correct info.
Let’s talk about car warranties: every car manufacturer has a different warranty, which may or may not last the entire lease term. And the dealer might not know this! Or a lot of the time the warranty doesn’t cover everything you think it will.
Chip in the windshield? Tires worn out? Your manufacturer’s warranty probably won’t cover it. And your leasing company will probably you pay “excess wear and tear” fees if those things happen. You can always buy an additional protection plan, but that’s just more to pay beyond the sticker price.
Let’s talk about monthly payments for a minute.
Yes, your monthly payment will probably be lower for a car lease vs. a loan. But here is the difference: at the end of the lease you have to give the car back. You literally have NOTHING to show for 2-4 years of payments. And if you lease your next car you’ll be stuck in a never-ending cycle of car payments.
Unless you feel you have the dough to spare (I know I don’t) you’re probably better off in the long run buying a car and selling it when it’s time to move on.
Tips from an Auto Finance Specialist 