I’m in the market for a car and I am faced with the question of whether to buy or lease. I have always bought but I am wondering about which way to go now. I am turning to Matzav readers for your input.
Conventional wisdom says that if you lease, you’ll have nothing to show for your money when the term is up. But that ignores the opportunity cost inherent in buying
With leasing, assuming your car is in good shape, when your years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don’t have to bother with selling the car or haggling with a dealer over trade-in value.
However, similar to paying rent on an apartment, your lease payments don’t go towards owning anything. Unlike traditional financing, you can’t look forward to the day when the payments will stop and you can drive your own car free and clear.
However, you pay a big penalty if you want out of the lease before the full term. Bailing out early may cost you as much as six extra months of payments, depending on your leasing company.
Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 12,000 to 15,000 miles per year. Also, you’ll have to pay up for any damage to the car beyond normal wear and tear when you turn it in. One way to avoid the mileage charge is to buy more miles at a reduced rate (of around 10 cents) up front.
If you total the car or it gets stolen, your insurance will only reimburse you for the car’s market value, which might not cover what you still owe on your lease. You can buy extra “gap coverage” to protect against this, and some lease deals include it automatically.
Leasing is attractive for people who want new wheels every three years or so.
I don’t need a fancy car. I don’t even want one.
My question is simply whether financially it is kedai to lease. If I buy (a used vehicle), I have to plunk down a lot of money (8 grand or more for a car and, say, 14 grand or more for a minivan). My friend tells me that it saves you the hassle of selling your cars, and allows you to move from car to car with relatively steady low monthly outlays and low down payments.
My concerns are the fact that I drive about 18-20,000 miles a year. I am also concerned about the scratches and other small damages once the lease is over. Am I going to pay through my nose?
I’d appreciate any help Matzav readers can give me to sort this through. I want to clarify that I am now looking to lease both a car and a minivan. I am not sure how that affects this discussion. Please help me understand if you can.
A Fellow Yid