The Financial Consequences Of Leasing A Car

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While at the dealership, the low initial costs of leasing a car may entice you into signing up for the dealership’s leasing program. When buyers do this,  they are mainly focused on the immediate gratification of getting the car that they want for a cost that they can afford. This fails to take into account the long-term cost of leasing a car. Once all of these costs are calculated, leasing a car can be significantly more expensive than buying that same car outright or purchasing a used car that is only a couple years old. Here is what you should take into consideration when deciding whether to lease a car.

Ownership

Unlike the other forms of acquiring a car, a person that leases a car has no ownership claim on the car. Car leasing is basically a long-term rental contract for a vehicle. The person leasing the car has to give the car back in an acceptable condition at the end of the lease term. You cannot sell the car to another person if you are leasing it and you cannot use the vehicle as collateral for another loan. All of the money that you pay towards the lease is simply a payment for the dealership to allow you to drive the car wherever you want to go.

Depreciation

When you are leasing a car, you are paying for the car throughout its greatest period of depreciation, and then returning it to switch into another new vehicle that you are paying for throughout its greatest period of depreciation. The cycle continues over and over with every new vehicle leased by the person. When adding this to the fact that the person will have nothing to show for their investment in the vehicle if they decide not to purchase the car when the lease contract terminates, it make leasing the most expensive option for obtaining a car.

Equity

If you lease a car, you will have no equity in the car. If you had brought the car outright, at the end of the same three year time period, you would have owned a vehicle that could be sold for thousands of dollars. By leasing the vehicle, you ensure that you will have to pay thousands of dollars if you want to stop leasing and own a vehicle. Having equity in the vehicle at a later date is a major reason why many people choose to buy a car. If there is nothing that you cannot live without on the newer car models, save some money and purchase a vehicle that is a few years old that you can afford instead of leasing a new vehicle that you cannot afford to buy.

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