Today we’re talking about leasing. I get a lot of questions every day with people asking if they should lease a car. If they shouldn’t lease a car. What are the benefits? How many miles do they get to drive? All kinds of questions. I’m going to answer them all.
WHAT ACTUALLY IS A LEASE?
First let’s talk about what a lease actually is. Here’s the definition… it is the use of a motor vehicle for a fixed period of time at an agreed amount of money. That’s it. You’re basically agreeing to lease the vehicle for usually two, three, or four years and paying a set amount of money per month. At the end of the lease you turn the car back in or you can buy it for a fixed amount.
NEW CAR EVERY THREE YEARS
One of the first major benefits I’d like to talk about is the ability to have a newer car every three years. The ability to have a brand new vehicle every three years. At first people are not sure they really need a new car every three years, but there’s another thing… I look at it as imagine having a vehicle that’s always under warranty. You’re never out of a new car warranty. You lease a car, and the only thing you’re really responsible for, for three years, is changing the oil and doing the service that the car needs during the time that you have it. These new vehicles only need oil changes every 10,000 miles depending on which car you lease.
When you think about those savings it’s amazing! You’re not worried about tires… you’re not worried about brakes… you’re not worried about major fixes on vehicles because anytime you have a problem you can take it to the manufacturer and have it repaired. In my world and in my mind, after doing this 23 years, I look at that as transferring my risk to the manufacturer. Yes, I always have a payment, but I always have a car that’s under warranty. When you have minimum repairs to do in your vehicle you can do a lot more things with your money.
THE PAYMENTS CAN BE LESS
Typically also a big benefit to leasing is that the payments are less than they would be if you have a long-term financial loan from a bank or credit union. If you take the lower payment, and you invest the difference every month, you can save much more money on a month-to-month basis. Also, when you compound that with not having to worry about doing transmissions and all different types of air conditioning fixes or things that cost a lot of money (and usually are brought on by emergency) then you start looking at the big picture and your financial obligation picture is very, very steady.
If you like that benefit I’m with you! Keep in mind that these things have to be set up properly so if you’re going to lease a car don’t do it without looking at all the pros and the cons.
HOW MANY MILES CAN I DRIVE?
Another one of the things that come up quite often is how many miles a year do you get to drive. You can drive in a leased vehicle up to 30,000 miles a year, but it has to be set up properly in the beginning. Otherwise, it becomes a major problem on the back-end. Once you are set up properly, and you have the right mileage in the lease, make sure you can drive within those limits. Also, make sure you read your paperwork before you leave the dealership. A lot of times people don’t read their paperwork and they don’t make sure that the right boxes are checked in their lease before they leave the dealership.
THERE IS FLEXIBILITY
Another major benefit to leasing is that things change. I see it quite often… families sign a 72 month loan on a sports car, and two years later they have a child and they need to get rid of that sports car and get something else. It becomes difficult to do with the limited budget. So if you’re leasing the vehicle you’re only responsible for it for three years and you can make changes every three years. You can go to a minivan, a sport utility, a third row seat. If you like the flexibility, that it is a major benefit for you.