Leasing a new car can be tricky business. Often, buyers are lured by the low monthly cost of car leasing, but leasing isn't always the best option. Experts agree that leasing is a good idea if you regularly change cars every 2 years and prefer to drive new cars. By leasing a car, you only have to worry about monthly payments and mileage limits - not about trade-in values or selling your car privately. The advantages of car leasing become clear for most people who have bought several new cars in a relatively short period of time. Paying those high monthly payments can seem like a waste of your budget, not to mention the depreciation hit you suffer on trade-in. Most people who do trade their cars in every 2 years or so tend to see a car as a monthly expense as opposed to an asset anyway, so for them it makes sense to either pay less or get more car for the same amount per month. On the other hand, car leasing is not the best idea for those who typically keep their car for more than 2 years. The biggest problem with car leasing is that it appeals most to those who can afford it least. Let's look at an example. Say you bought a new car at a monthly payment of $400 per month for 5 years. Assume that the car will remain in good working order for about 10 years. That's a total cost of $24,000 over 10 years, or $200 per month. Let's assume that the car retained 15% of its original value when it gets traded in after 10 years of service and subtract the remaining $3,600 of value from the total cost. That brings the average monthly cost to about $170 per month. Obviously, a lease price of $250 per month would be no bargain, especially considering the fact that car prices go up and your payments will probably increase with each new lease. In short, leasing isn't for everyone. If you feel your economic situation is stable enough, and you like to drive new cars, then car leasing is probably a good fit. But whether you lease or buy, I would always recommend using a new car buying service to get competitive lease or pricing quotes first. That way, you can do the math yourself and decide whether you should lease or buy. |
