Jim Winsett of the BBB. Q. I am considering an auto lease; what may be the pros and cons of automobile lease?
A. Better Business Bureau reminds consumers in the market to lease a vehicle to consider all the options before making a decision. Do your due diligence and check out car dealers at bbb.org before doing business.
As car owners look to upgrade their current vehicle, there are two options to consider - buying or leasing a new vehicle. Traditionally, car buyers simply financed a vehicle to be paid off over time until it was either paid off or traded in.
The benefit to buying is that equity is built up in the vehicle over time as the balance dropped. Consumers keep their vehicles after they are paid off, building up further equity by paying a vehicle note every month.
If you financed the total cost of the vehicle, monthly payments are generally higher than a lease arrangement. According to Consumer Reports, leasing can be more appealing than buying. Based on the term of the lease, payments are typically lower and the leased vehicle is returned at expiration.
There are other advantages to leasing:
1) some lease programs provide low down payment or with good credit, no payment to initiate the lease.
2) A lease enables consumers to drive a higher-priced, better-equipped vehicle.
3) Typically, the term of the lease will be covered by the manufacturer's warranty.
Despite the obvious benefits, there also are drawbacks to leasing a vehicle:
- Leasing typically costs you more than an equivalent loan, in part because of higher finance charges.
- Be aware that after a consumer begins a cycle of leasing vehicles, monthly payments go on forever. In contrast, the longer you keep a vehicle after a loan is paid off, the more value you get out of it.
- You have a limited number of miles in your lease contract, typically 12,000 to 15,000 miles a year. If you drive more than that, you will have to pay an excess mileage penalty for each additional mile.
- You must maintain the vehicle in good condition or you will be required to pay excess wear-and-tear charges at the end of lease.
- If you need to get out of a lease before it expires, you may be required to pay the lease balance in early-termination fees and penalties. All payable and due at once. This could equal the amount it would cost had you continued with the lease for its entire term.
If you want low monthly payments but are concerned about the limitations of a lease, consider buying a less expensive vehicle, a well-maintained used car or consider a longer loan term.
Finally, be an educated consumer and do your research on the automobile. You save money by choosing a vehicle brand that holds its value, is reliable and fuel efficient.
Jim Winsett is president of the Better Business Bureau in Chattanooga.