Having reliable transportation is essential. If public transportation or riding a bike isn’t an option, you may be looking at a range of cars that fit your lifestyle. From new cars to used cars, you not only have to decide on the make, model, and year, but also on whether you plan to buy or lease a vehicle. So, is leasing a car the best idea?

Leasing Options Making a Comeback

Several years ago, leasing was a very popular financing solution. People could lease the newest vehicles for a lower initial cost and lower monthly payments versus buying a brand new car. They could drive the vehicle during the lease term and then give the vehicle back. When the time comes again where they need reliable transportation, they could lease another vehicle for a specific amount of time.

Leasing has again become a trend for tight budgets. The appeal of only paying the depreciation value of the car at low monthly payments for about 3 years has become a much more ideal solution when you’re staring at a high car loan payment. Also, people who love to have the newest vehicles can constantly trade-up for something better in a few years. Lastly, the car will usually come with a warranty during the 3 years that will cover any unexpected repairs that are not related to wear-and-tear or caused by any fault of the driver.

But, is leasing really that great of a deal for those with tight budgets?

The Hidden Dangers of Leasing

Unfortunately, there are pitfalls with leasing. On the surface, leasing seems to be the great option to provide you with a car at a lower budget. Yet for the long term, leasing a car can lead to significant financial issues.

1. You will always have a car payment.

One of the major issues is that constantly leasing a vehicle means that you will never be without car payments. Unlike buying a vehicle where you eventually pay off the loan, you always have to account for a monthly car payment. Let’s say your lease payment is $350/month and you’ve been leasing for 9 years. Meaning, you’ve leased three different cars for three years each time. That’s $37,800 you’ve paid that you have nothing to show for. That doesn’t even include any extra fees, tires, brakes, or maintenance costs. Those are all your responsibility. Yet, you don’t own the car.

2. You aren’t building equity.

In addition to always having a car payment, you aren’t building equity. If you bought the car, you could trade it in or sell it to reduce the cost of your next vehicle. When you lease a car, you’re basically renting it. When you buy a car, you’re investing in something.

Curious about trade-in values? You can look up your car on sites like Kelley Blue Book to get an idea of how much equity you’d have if you bought your vehicle and were looking to trade it in.

3. Mileage restrictions.

There are also restrictions and fees that you need to be aware of when you lease a vehicle. There will be mileage restrictions on an annual basis. So, you may find that you can only drive it up to 9,000 miles or you will incur costly mileage overage fees. There is usually an option to add more miles per year, but it will cost you extra in your monthly payment.

4. You still have maintenance costs.

You still have to properly maintain the car as you will have to pay for excessive wear-and-tear if that happens. That means oil changes, brakes, tires, and anything else the warranty doesn’t cover.

5. There may be hidden costs.

While you may be able to customize the car after you get it, you will have to pay to have the vehicle returned to its original state when it comes time to return it. Also, if you decide to terminate the lease agreement before the end of the term, early termination fees can be extremely high and put stress on your finances. There are also turn-in costs that they don’t disclose. When you turn the car in, these charges can be anywhere from $250-$800 just to give the car back.

6. Sneaky dealership tactics.

Just like when you’re buying a car, don’t ever talk monthly payment with the dealer. You want to know the total cost you’ll be paying over the lease term. If you tell them what you want your monthly payment to be, they will make it work by extending terms, lowering your mileage, or putting you in a lower model car. We’ve seen people unknowingly walk away with 4 and 5 year lease deals for a model they didn’t even want. The dealer will make the numbers work just to get the monthly payment where you want it. Always ask for the final details. Don’t get wrapped up in the excitement of a new car and forget the real reason you’re there – to get a good deal.

Consider All Your Options When Leasing a Vehicle

While there may be some benefits, there are also some major financial issues with leasing a car. The main problem is that you will always have car payments. While the lower monthly payments may seem like a great option, you’ll never enjoy the benefits of driving your own car, payment-free. You will also never be building any equity in your car when you lease. You’re literally throwing money out the window.

We’re Here to Help!

If you’re ready to get behind the wheel of a new vehicle, we’re here to help you make the best financial decision for your specific needs. We can talk you through getting pre-approved before heading to the dealer, refinancing, or buying a new or used car. Call, text, or chat with a member of our team, M-F, 9am-4pm ET. (315) 671-4000.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.