Many new car drivers lease, rather than purchase, their vehicles. Although leasing can be a good deal for some people, for many it's not. Before the dealership persuades you that leasing is the answer to your prayers, you should have a good understanding of the advantages and disadvantages of a lease, where to get a good lease deal, how to get all the facts about cost, and what happens if you have to cancel the lease early.
When you lease a vehicle, you don't own it. You get to use it during the lease term, for a monthly fee, but must return it at the end of the lease. In many leases, you have the option to buy the vehicle at the end of the lease.
There are two main reasons people lease, rather than buy, a vehicle:
Although you may be eager to drive an expensive new set of wheels, consider the following disadvantages to leasing a car before you make your final decision:
Your lease agreement will specify who must pay for maintenance and repairs during the lease term. In addition, the agreement should come with a manufacturer's warranty. Ideally, it will cover the entire length of the lease and the number of miles you are likely to drive.
Most lease agreements require you to pay for excess wear and tear. This means that when you return the vehicle at lease-end, the dealer could charge you to fix anything deemed excessive by the lease agreement. Read this portion of the lease carefully. After all, every car is going to have a little wear and a few nicks after three or four years' use, and you want to be sure that the wear and tear standards are reasonable.
Look for a deal that includes "gap insurance" or waives "gap liability." If the vehicle is stolen or totaled, gap insurance will pay the difference between what you owe under the lease and what the dealer can recover for the vehicle—a difference that could amount to thousands of dollars. Some leases waive gap liability.
Usually, you cannot cancel a lease agreement before the end of the term, unless you're willing to pay a substantial penalty. If you want to cancel your lease, look carefully at the provision describing what happens if you default or want to terminate the lease early. Ask the dealer or lessor to calculate how much it would cost you to terminate the lease early.
To learn more about leasing a car, see Nolo's Encyclopedia of Everyday Law, by the Editors of Nolo.