Leasing a New Vehicle

There are a lot of myths and misconceptions when it comes to leasing vehicles. A lot of money gets tied into our vehicles, so let’s set the record straight when it comes to leasing vehicles.

What is vehicle leasing?

Vehicle leasing is the leasing (or the use of) a motor vehicle for a fixed period of time. It is commonly offered by dealers as an alternative to vehicle purchase but is widely used by businesses as a highly cost-effective method of acquiring (or having the use of) vehicles for business, without the usually needed cash outlay. The key difference in a lease is that after the primary term (usually 2,3 or 4 years) the vehicle has to be returned to the leasing company for disposal. (source)

Why would someone lease rather than buy?

It’s no secret that buying a car and keeping it for 10 years will be cheaper than leasing for 10 years. However, there are some benefits to leasing:

  • You’ll drive a new car every few years. Some people prefer to drive newer cars. You do end up paying more over the long run, but you also get to update or change vehicle models regularly. This also helps for certain situations. For example, if you lease a sedan and realize you need a vehicle that can tow, you can easily change vehicles at the end of your lease.
  • Car payments are lower than purchasing. Lease payments are basically calculated by estimating the residual value of the car at the end of the lease term. The payments are combination of a depreciation charge and a finance charge. Therefore you don’t actually pay the full price of the vehicle, but only part of the price depending on the estimated residual value. For example, if a new Toyota Camry is worth $22,000 new, you may pay around $12,000 over the 36 months of your lease. (it can vary depending on your deal)
  • Leased vehicles remain under warranty over the term of the lease. Usually lease terms coincide with the terms of the manufacturer’s warranty – 36,000 miles and 36 months. Sometimes lease terms can be longer, but many times there may be extended warranties offered for those. This offers an extra level of security, as a leased vehicle will most likely be under warranty the entire time you drive it.
  • You don’t have to sell/trade/dispose of unwanted cars. Once you are done with your lease you return the car. If for some reason you wanted to keep it, you would also have the option to buy it by paying the remaining balance of the original price of the car.
  • You take care of your car and don’t modify them. Since leased car have to be returned, you will be responsible for any damages not covered through warranty. If you already take good care of your car and don’t modify it, you will most likely have no issues when returning a car. Also, some dealerships forgive a certain amount of repairs if you agree to a new lease at the end of your current lease.

If the points above suite you as a driver, so may want to consider leasing a vehicle. Of course, make sure you look at the numbers to make sure you are still getting a deal.

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Comments
6 Responses to “Leasing a New Vehicle”
  1. Jessica says:

    I leased a car last year and so far I really like it. I can trade the car in after 3 years, oil changes and maintenance is covered for the first 2 years, and the payment is much less than if I had bought the car.

    • Gian Sorreta says:

      I’ve actually leased my last two cars. I have found that I really like the fact that I could change cars pretty easily after the lease term. (I like to do 36 month leases) I went from an SUV, to a smaller car to save on gas. Now I realize I really liked the SUV and I also have times I need to haul stuff, so I might switch to an SUV or truck when my lease comes up this summer.

      The lower payments and almost zero maintenance costs are also nice too :)

  2. Eric Chaump says:

    G

    Thanks for sharing your thoughts on leasing a vehicle. I’ve always been curious about leasing. I’ve owned my cars all my life and so has everyone I know. When I tell people I’m considering leasing a new car, they tell me, “why would you want to pay for something you don’t own and never will?”. Good point. But for someone like me, who gets bored with a car after about a year, I’d be making car loan payments toward something I’m probably going to sell before I pay it off.

    My other problem is that I like to modify my car, because I like it to be unique. I want it to stand out on the street so when someone sees my car, they instantly know it’s me.

    Do you know if they have shorter term leases? Like 12 months? And what if you give a car back before the lease is up?

    Thanks,
    Eric

    • Gian Sorreta says:

      Unfortunately I have never seen or heard of a 12 month new car lease. I’ve seen some as low as 24 months. The only way to get a 12 month lease would be to take over another person’s lease with 12 months remaining.

      If you give back the car before the lease if up you still owe the remaining payments. Fortunately, many dealerships can work with you, especially if you are going to lease or buy another car from them. Toyota has offered to waive the last 3 payments of my lease if I get another car with them right now. Subaru is offering me the same deal, so I do have extra options now if I want a new car right now.

  3. Never really gave this a thought actually, but I’m beginning to see the benefits of leasing now. Thanks Gian!

    Btw congrats with those home improvements. Just saw the vid, looks great!

    Wim

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