HARDISON’S TIPS – DECEMBER 30, 2021 – LEASING VS. BUYING -2
• If you don’t maintain the vehicle in good condition, you’ll have to pay excess wear-and-tear charges when you turn it in. So if your kids are apt to go wild with the magic markers or you’re a magnet for parking lot dents and dings, be prepared to pay extra.
• If you decide that you don’t like the car or if you can’t afford the payments, it might cost you. You will probably be stuck with thousands of dollars in early termination fees and penalties if you get out of a lease early—and they’ll all be due at once. Those charges could equal the amount of the lease for its entire term.
• With a few exceptions, such as professional window tinting, you need to bring back the car in “as it left the showroom” condition, minus usual wear and tear, and configured like it was when you leased it.
• You’re still on the hook for expendable items such as tires, which can be more expensive to replace on a better-equipped vehicle with premium wheels.
• You may have to pay a fee when you turn the vehicle in at the end of the lease.
An Alternative to Long Loans
Some car buyers opt for longer-term car loans of six to eight years to get a lower monthly payment. But long loans can be risky, and these buyers might find leasing to be a better option.
Longer loans make it easy to get “upside down”—where you owe more than the vehicle is worth—and stay that way for a long time. If you need to get rid of the car early on, or if it’s destroyed or stolen, the trade-in, resale, or insurance value is likely to be less than you still owe.
Buying a car with a loan isn’t the way to go if you want to drive a new car every couple of years. Taking out long-term loans and trading in early will leave you paying so much in finance charges compared with principal that you’d be better off leasing. If you can’t pay off the difference on an upside-down loan, you can often roll the amount you still owe into a new loan. But then you end up financing both the new car and the remainder of your old car.
Leasing is not for everyone but as the years go forward, you need to take a good look at it.
