Having reliable transportation for work, recreation, and to run daily errands is essential. If public transportation or riding a bike isn't an option, you may be looking at a range of cars that fit into your lifestyle. From new cars to used cars, you not only have to decide on the make, model, and year but also on whether you plan to buy or lease a vehicle.
Leasing Options Making a Comeback
Several years ago, leasing was a very popular financing solution. People could lease the newest vehicles on the lot for a lower initial cost and lower monthly payments versus getting a car loan. They could drive the vehicle during the lease term and then give the vehicle back. When the time comes again, where they need reliable transportation, they could lease another vehicle for a specific amount of time.
With the new younger generation, leasing has again become a trend for tight budgets. The appeal of only paying the depreciation value of the car at low monthly payments for about 3 years has become a much more ideal solution than giving a higher down payment to the car dealership. Also, people who love to have the newest vehicle that enters the market can constantly trade-up for something better in a few years. Lastly, the car will usually come with a warranty during the 3 years that will cover any unexpected repairs that are not related to wear-and-tear or caused by any fault of the driver.
The Hidden Dangers of Leasing
Unfortunately, there was a dangerous problem with leasing that baby boomers experienced that young adults are now discovering. On the surface, leasing seems to be a great option to provide you with a car at a lower budget. Yet for the long term, leasing a car can lead to significant financial issues.
One of the major issues is that constantly leasing a vehicle means that you will never be without car payments. Unlike buying a vehicle where you eventually pay off the loan, you always have to budget your finances to account for a monthly car payment. In addition, you cannot build equity in the vehicle that you can later use as a trade-in to reduce the cost of your new vehicle.
There are also restrictions and fees that you need to be aware of when you lease a vehicle. There will be mileage restrictions on an annual basis. So you may find that you can only drive it up to 9,000 miles, or you will incur costly mileage overage fees.
You still have to properly maintain the car as you will have to pay for excessive wear-and-tear. While you may be able to customize the leased vehicle, you will have to pay to have the vehicle returned to its original state when it comes time to return it. Also, if you decide to terminate the lease agreement before the end of the term limit, early termination fees can be extremely high and put stress on your finances.
Consider All Your Options When Leasing a Vehicle
While there may be some benefits, there are also some major financial issues that can get your savings account in hot water. The main problem with leasing is that you will always have car payments. While the lower monthly payments may seem a great option, you’ll never enjoy the benefits of driving your own car payment-free.
We’re Here to Help!
If you’re ready to get behind the wheel of a new vehicle, we’re here to help you make the best financial decision for your specific needs. Stop by or give us a call at 800-343-6328 to get started.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.