Usually when people need a new car they buy one, which makes sense as it’s the simplest path to driving a new car, however there is another option. Leasing a car is sort of like a long term rental, you pay monthly installments to drive the car for a set amount of time, usually around 2 years, before returning it to the dealership. There are many advantages and disadvantages to this method of car ownership and we’re going to explore them in this article.
The Pros of Leasing
The biggest pro of leasing is that the monthly payments will be cheaper than those of a car loan, meaning you can either have less monetary concerns month to month, or drive a nicer car than you’d be able to buy. Leased cars are always new models so if driving something new is what you’re after then leasing and trading up every few years will ensure you’re always ahead of the curve.
Leased cars are generally also covered for maintenance costs by the dealership, meaning you don’t have to panic if something breaks down.
The Cons of Leasing
The big downside is that at the end of the lease period. Unlike with a car loan, you don’t own the car, which can be a negative for a few reasons. If you fall in love with the car you either have to return it or pay off the remaining value of the car, which will likely be a significant sum. It also means that your money paid towards the lease is a sunk cost, you don’t get anything in return, where if you bought the car you would have the car that you can sell to potentially recuperate some of that money later.
Leases also come with a lot of rules about how you can use the car and take care of it. For example if you bring the car back with lots of dings and scratches you’ll be fee’d. But more importantly most leases come with a mileage limit, generally around 15-20 thousand kilometres which if you go over will result in massive fees.
Should You Lease
Like most things financial, it depends on your situation. The main question is what you’re planning to use the car for, and how long you’re planning to keep it. If the answer is less than 2 years then financially it can make more sense to lease, as long as you keep your mileage under the limit. If you’re looking for a family car that lasts, then leasing is probably a bad call, since you want a car that you have total control over.