Having a new car is a desire for most of us, but it could not be affordable for many people. That is one of the reasons why some people might feel a little tempted to lease a car instead of buying one of their own. But don´t act foolishly, and think twice before getting a car lease agreement.
Leasing a car seems to be an alternative for some people who change their automobiles in relatively short periods of times, let´s say every two or three years, but have you ever thought about the disadvantages of leasing a car? Well, we are going to discuss some of these issues right in this article, so keep reading.
As you may know, leasing a car is pretty much renting the car for a determined period of time, mostly while it is still in warranty, and that time commonly would be something in between 2 to 4 years. But the true owner of the car is the lessor agency, and it is an obligation to buy an insurance policy along with the leasing contract.
Once the period of time of the leasing has expired, the car must be returned to the company that financed it, and the vehicle must be in excellent condition. You should be aware that there are some penalties and extra charges you would have to pay for excess wear and tear. So you must be extra careful taking care of every single piece of the car or get your account ready for some extra payment.
The insurance policy you have to buy is the most expensive one because it should have the larger coverage that exists on the market for the leased car (find out how to negotiate a lower rate). That is because the agency that finances the lease needs to be sure that its good, safe and protected from any possible damage.
You also cannot drive as far as you would like to, and the reason is that you cannot exceed the mile limitation quantity because if you do, then you must pay for the exceeded miles. The price or every extra mile could be very high, so it would substantially raise the amount of money that you would have to pay.
Another reason not to lease is the monthly payments you must afford. If you stop paying the agency, they will immediately proceed to get the leased car back, and it will obviously damage your credit record permanently. It would affect your chances of getting credit in the future, and if you get a loan, this bad record will increase the rate of the loan.
You may also want to know that the payments of the lease are calculated pretty much as the loan payments. So it seems to be wiser to buy a car instead of giving the money to the lessor company for four years, which is the regular time you may take to pay a car of your own entirely. In fact, in many cases, leasing a car for 4 to 5 years is even more expensive than paying the loan for a car of your own.
Another important fact you may want to take into consideration is that, while you are constantly leasing cars, the payments will not stop, they will just keep coming in every month. But if you buy a car you will eventually pay off the whole loan, your budget will be released from this burden, and you can still enjoy your car.
If you want to end the lease agreement earlier than stipulated, then you would have to pay the so-called early termination fees, along with other penalties, all at once. And that amount of money is as high as all the lease payments combined. So it is extremely expensive to get out of a lease contract before the termination date.
Here’s what financial guru Dave Ramsey has to say about leasing a car: