Auto Leasing

Is a car lease for you? Many drivers swear by car leases while others prefer traditional methods of financing. Both types of financing fit a specific need. For example, if you tend to keep your cars long after they've been paid off, then a standard car loan makes sense. However, if you keep your cars for a year or two before trading them in for something new, than an auto lease makes sense.

 

When considering a car lease, keep in mind that at the end of the term you must either turn in the car or pay the car's residual value. Know this going in and you'll be prepared. If you want to keep the car, you will need to pay it off either with cash or a new loan. If you'd rather move on to the latest car on the market, then you simply surrender the car and start shopping for a new car.

Leasing has its advantages for those who like to drive new cars including lower monthly payments and fewer out-of-pocket expenses. Payments are generally lower on leases because you are only financing the car's depreciation during the time you own it. For example, if the car is worth $30,000 when you start the lease and will be worth $10,000 at the end of the term, the amount financed is $20,000 - not the full $30,000.

 

Because lease terms are generally shorter, you'll have fewer out-of-pocket repair expenses because not only do newer cars experience fewer problems, any problems that they do experience are usually covered under warranty.