The commercials are everywhere – automakers are rolling out new models and dealers are trying to get you in the door. You may be tempted to update your ride, but is leasing right for you? In this Angie's List report, the pros and cons of leasing a car.
For many people, leasing a new car can be more appealing than buying new.
"When we compared both costs we realized that we were better off leasing, and again, considering the fact that we only wanted it for a short period and then needing a new car after several years," says consumer Citrana Harmon Forgenie.
Auto experts say a brand new car can depreciate in value by up to 20 percent as soon as it's driven off the lot.
"Leasing is really back in a big way," says Jeff Roush, general manager at a car dealership. "We run anywhere right now from 40-50 percent lease of all our new vehicles."
Lease payments are generally lower than loan payments.
Monthly lease payments can range from $160 to well over $1,000, depending on a vehicle's make and model.
A typical lease lasts for 36 months, though some dealerships offer them for one to five years.
"When deciding whether to lease or buy a car you need to think about your lifestyle," says Angie Hicks, founder of Angie's List. "Remember that when you are leasing you're going to get a new car every few years but you're also going to have a car payment even though your car payment is less than if you were buying the car. Additionally, remember that if you are leasing there is usually limitations on mileage so if your office is a long distance from your home you want to be careful you have enough miles on the lease. "
"If I ever have anyone disgruntled over the lease it's because they way overestimated their miles and they did it because they were trying to achieve a payment," says Roush. "They went ahead and signed a lease for 10,00 miles a year knowing that they drive 18, but it was the payment they wanted but they got a real smack in the face when that thing was all over and now they have a big ole mileage penalty at the end."
Whether you lease or buy, it's important to do your research. Never walk into a dealership uneducated. You need to know what you want and what you can afford.
"When leasing a car it's just like buying a car," says Hicks. "You should be prepared and understand how much the car is really worth and go in ready to negotiate. Don't just think about the monthly payment. Also think about the residual value of the car, the price you would pay if you buy the car out of the lease because you might fall in love with the car and want to keep it."
Angie's List advises consumers to read and fully understand the lease agreement before signing.
Also, ask the dealership about gap insurance coverage. If you have it and the leased car is wrecked, the insurance will cover the difference between the car's actual market value and the remaining balance to pay the lease off.