When leasing a vehicle, you make monthly payments to a leasing company, except, in essence, you are renting the vehicle for an amount of time specified in a contract, typically two to five years. The payment includes interest, leasing costs, finance charges and any applicable taxes. After the lease term is up, you bring the vehicle back to the dealership and have the option of leasing another vehicle, purchasing the current vehicle or turning in the vehicle. There are some cons when leasing a car.
Cost and Payments
When leasing a vehicle, an important disadvantage to consider is that it usually costs more than paying a loan to buy the vehicle. According to Consumer Reports, this is due to finance charges usually being higher when leasing.
An article published on the website Lease Guide states that when it comes to the cost of leasing a vehicle, the long-term cost tends to be higher than the cost of buying a vehicle, assuming the customer wants to purchase the vehicle when the lease ends.
Number of Miles and Condition of Vehicle
When a vehicle is leased, there is a limited number of miles you can drive per year. If you exceed the mileage limit as written in the contract, penalty fees will be applied.
The vehicle must also be kept in good condition when leasing. If the vehicle is not maintained in good or acceptable condition, extra wear and tear charges can be applied if you turn in the vehicle at the end of the lease term.
Early Termination Fees
Once you lease a vehicle, it is for a specified amount of time. When the lease is up, you can choose to lease a different vehicle, purchase the original vehicle or just walk away. If you want to get out of the lease before it expires, you may be charged early-termination fees and penalties.
No Customization and Insurance Costs
Leased vehicles are not allowed to be customized in any permanent way, such as a new paint job or adding permanent decals.
Leasing companies usually require higher amounts of insurance coverage than what you may normally be used to. For instance, insurance companies tend to require higher comprehensive limits on leased vehicles when compared to vehicles purchased with a traditional loan.
No Ownership and Different Credit Requirements
When leasing a vehicle, technically that vehicle is being rented, much like signing a lease for an apartment. You are paying to drive the vehicle rather than making payments toward ownership of it.
The article titled "Pros and Cons of Leasing" from the website Lease Tips states that because leased vehicles are owned by the leasing company, they need to be assured that payments will be made in full and on time, so credit requirements tend to be higher for people leasing a vehicle than for those looking to buy. If you have questionable credit history, you may have difficulty getting approved to lease a vehicle.
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