The world of new-car shoppers is divided into two camps: those who buy and those who lease. Buyers like the peace of mind of owning their vehicle and knowing that if they pay cash or keep the car past the loan payoff date, they'll likely come out ahead financially. Yes, you're on the hook for repairs after the warranty expires, but repairs are likely to cost less each year than car payments.
Lessees love the flexibility to trade up frequently to a brand-new set of wheels. More than one-fourth of new-car transactions in 2014 were leases, and the percentage is rising.
The case for leasing. If you always have a car payment--because you trade in your cars often or you tend to finance with long-term loans--then leasing is a good choice. Because you're paying for a car's depreciation only over the term of the lease, your payments are lower than if you financed the entire cost. The majority of leases are written for three years, so a leased vehicle is almost always under warranty.
Suppose you buy a 2015 Chevrolet Malibu 1LT for
However, you can lease the same Malibu for
Leasing does come with strings attached. Excess wear and tear will cost you, although leasing companies usually don't charge for scratches or a less-than-pristine interior. Plus, mileage is typically capped at 12,000 to 15,000 miles per year, and you'll pay about
Keep in mind, however, that when you buy a car, high mileage, customization, and dents and dings also drag down its value. The money comes out of your pocket when you sell. Also, if you decide to trade in a vehicle, you may get less than you anticipated if its value suddenly drops--as SUV values did when gas spiked to
If you want to get out of a lease, there are ways to do it without paying an early-termination fee. A dealer may contact you for a "pull-ahead program," which lets you return your car to the dealer and lease a new car, often at more-favorable terms. (Dealers sell your previous car as a certified pre-owned vehicle.) Or you could sell the car yourself and walk away from your lease with a check in your hand if your vehicle is worth more than the purchase price written into the lease (see our story Cash Out Your Lease on Your Car).
LeaseTrader.com and SwapALease.com match lessees who want to exit early with shoppers looking to pick up a short-term lease (cost for the service:
Comment by clicking here.
Jessica L. Anderson is Associate Editor of Kiplinger's Personal Finance magazine. .