When most people are looking for a new car, one of the options that they think about is whether or not a car lease would be more beneficial and cost effective for them than purchasing the car. There are many schools of thought about this and many differing opinions, but what it comes down to is that there is no right or wrong answer that applies to everyone, because everyone’s situation and needs are different.
When you sign on for a car lease, it means that your payments are going to reflect the amount of depreciation of the car over the term of the lease. For example, if the car you are looking at has a sticker price of $30,000 and you sign up for a one year car lease, the dealership estimates that this vehicle, after two years of use and about 24,000 miles, can be sold for say $20,000, assuming a modest dealer profit is included there as well. So your lease payments would be based on $10,000.
Granted, this is a very simplistic look at how lease payments are calculated, but this is pretty much the bottom line. Based on this, you can see that choosing a vehicle for your car lease that has a great resale value is going to keep your lease payments much lower than a car that depreciates much more quickly and does not have a good resale value.
The miles that you plan to drive the car that you put on lease is critical, since one of the major factors that influences the car’s resale value will be the number of miles on the car. Most lease programs allow you about 12,000 miles per year. It is very important that you are able to come up with a very good and very accurate estimate of the number of miles you will drive the car over the lease term, since that will have a major impact on the amount of your monthly lease payment.
If your planned usage of the car is to drive more or less than the standard number of miles per year, talk to your dealer about that. If your usage can be committed at 9,000 miles per year instead of 12,000 then your lease payments will be lower because the car will have fewer miles on it at the end of the car lease term, thereby giving it a higher resale value. But if you realistically plan to put 18,000 miles a year on the car, be VERY sure to mention that also. Your lease payment will go up, but that is much better than being assessed for excess mileage at the end of the lease, where excess mileage may be charged at a rate as high as 30 cents per mile!
In a car lease, you do not own the car and will never have title to the car. In essence, you are doing a long term rental of the car. But you still need to make the payments, and you are responsible for car insurance on it. And since you do not own the car, you will need to carry full insurance coverage on the car, including collision coverage. You are also responsible for repairs to the car, including things that are not covered under warranty, additionally to “consumable” thingssuch as tires, wiper blades, oil changes, etc.