To Finance or To Lease, That is the Question

When it comes to acquiring a vehicle, two main monthly payment options present themselves: financing or leasing. While the allure of lower monthly payments can make leasing appear more attractive at first glance, it’s crucial to delve into the finer details. The affordability of monthly payments may be emphasized, but the small print often tells a different story.

Are You Looking at “The Real Cost”?
Leasing can obscure the actual cost of a vehicle. Although the focus is often on the monthly payment, leasing tends to be more expensive in the long run. If you choose to finance the remaining vehicle balance after the lease term, you’re committing to additional years of payments. Moreover, those with sub-optimal credit may not get approved for a lease at all.

Are You Considering the Extra Taxation?
Depending on your state, taxes for leases may be higher than those for vehicle purchases, and on top of that, tax credits may not be available when trading in a lease.

What About Mileage Overages?
Leases come with a set number of miles. Going over this limit can lead to hefty per-mile overage charges, often around 35 cents per mile. A seemingly negligible amount can quickly accumulate; an extra 5,000 miles would cost you an additional $1,750.

Don’t Forget the Repair Costs.
Leased vehicles must be returned in the same working condition as they were leased. If repairs are needed when turning in the vehicle, such as new brakes, you’ll be responsible for these costs or face charges from the leasing company.

And Be Warned, There Are Often Additional Fees.
Unbeknownst to many, substantial fees are quietly rolled into the cost of the vehicle - acquisition fees can climb as high as $1,200, and disposition fees can reach $850.

Plus You May Have To Pay Wear and Tear Charges.
Any minor damage to the car’s finish or wheel covers can be charged against your deposit.

And Did We Mention Increased Insurance Costs?
The amount of insurance required for leased vehicles is often higher, leading to increased costs.

And Finally, Another Extra Charge – Lease Termination Penalties.
Lifestyle or career changes may necessitate terminating your lease, but this isn’t always possible. Even if you can terminate the lease, early termination penalties can be severe.

So, while leasing can seem attractive initially, it’s essential to consider all the potential costs that accompany this option. From extra taxation and mileage overages to repair costs and hidden fees, leasing a vehicle may not be as affordable as it first appears. Remember to weigh all your options and consider your lifestyle and financial situation before deciding.

And don’t forget, financing a vehicle could be more affordable than you think. At CarShop, we work with 20+ national and local lenders to find the best financial plan for your purchase. Learn more about financing options at CarShop today.