Car leasing is a process by which you make a monthly payment on a vehicle in order to rent it, but you rent the vehicle for only a set amount of time and return it once the lease is up. Like many things in life, there are both advantages and disadvantages to this process, depending on personal preference and financial situation. You should consider these pros and cons completely before you decide to lease a vehicle.
Advantage: Short-Term Investment
Leasing will allow you to enjoy a new vehicle for the length of the lease term, and then return it with no strings attached. If you are looking for a vehicle to last only a year or two, or are otherwise unsure how long you want to keep a vehicle, then this is a benefit. Leasing allows you to take advantage of owning a new car without it being a long-term investment.
Many auto manufacturers offer leasing specials that feature low monthly payments and down payments. They do this for various reasons, all of which can be beneficial to you if you are looking for a vehicle for a short period of time. Rather than pay a hefty down payment and large monthly payments for a car that you have to pay off over five years, you can take advantage of specials and walk away with a car for a much smaller investment.
Disadvantage: Mileage Penalties
If the company from which you are leasing feels that you have used excessive mileage, you may incur a penalty and have to pay to accommodate for the mileage over a specific limit. To combat this, you should read the leasing contract and ask questions to find out how many miles you are allowed to drive over the life of the lease.
Disadvantage: Credit Requirement
Because of the nature of leasing, you must have a good credit score to lease a vehicle from most companies. It is sometimes easier to qualify for a traditional auto loan than to qualify for a lease agreement based on your credit.
Disadvantage: Auto Insurance Premiums
When you lease a vehicle, the auto insurance that you must get is much more extensive and comprehensive than the requirements for when you own the vehicle. Additionally, you will still have to maintain the car that you are leasing as if it were your own, and all the maintenance costs must come out of your own pocket.