Lease Or Buy? In This Economy, The Answer May Surprise You
Dealers are running out of used cars due to increased demand from buyers and from fewer people selling older cars. This means leasing a new vehicle might be the better solution for buyers looking to upgrade to a new car.
In order to increase the number of quality used cars available to sell, dealers are more eager than ever to lease new vehicles. Leased vehicles turn into high quality, higher priced used vehicles. What does that mean for you? More new cars can be leased for low interest rates and more affordable monthly payments.
KARE 11 news in Minneapolis-St. Paul covers the benefits of leasing, rather than buying, your next new car.
If you’re thinking about leasing, here are some questions you’ll want to answer first.
1) Do you want a new car again in around three years? Leasing is an agreement to pay for the use of a new car, and then to return it to the car maker after a set amount of time. You will probably pay less than you would month-to-month in order to drive it versus buying it outright. In exchange you do not own the car and will be charged a hefty sum if it is returned in poor condition or if you end the lease before the agreed upon date.
Are you hoping to skip the down payment? Down payments can often be avoided with a leasing agreement, but not always. With leasing becoming more popular, more auto makers are requiring down payments in order to get the same great rates as they offered a few years ago.
**Do you get attached and want your car to last? **If you want a new car to last you for 5 or more years, leasing is probably not for you. It might not be for you either if you intend to use your vehicle to do heavy work, towing or a lot of driving for you. However, if you do lease and then get attached to your vehicle, it’s not difficult to refinance and continue to make payments to pay for the vehicle.
Can you afford enough coverage for a leased vehicle? If your leased vehicle is totaled your comprehensive and collision auto insurance might not be enough to cover the cost you owe the auto maker. To protect against that possibility, be sure to look into something called “gap coverage” before signing up. It’s often included in lease agreements.
Do you drive a lot? Before signing on, think about how much driving you do. Most lease agreements are for 12,000 or 15,000 miles a year. Driving over that may cause you to pay hefty per-mile fees!
The Federal Reserve has even more detail about the rules and regulations behind leasing you’ll definitely want to check out.
One of the biggest factors to consider when deciding whether to buy or lease a car is rebates and financing rates from car makers. As the video from KARE demonstrates, a big part of the savings from a lease can come from car maker rebates, so be sure to do your research. CarSoup.com lists all current offers from car makers on the website. You can also reach out to local dealers to see what their current offers are.
Top photo by Emilio Labrador, via flickr.com by way of the Creative Commons Attribution Licence.