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. (For more information on short-term car rentals, see Nolo's article Renting a Car.)
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:
Before you lease a car, make sure you know what the final cost will be. The federal Consumer Leasing Act requires lease agreements to include, among other things, the total amount due, a statement of costs (such as the number and amount of regular payments), insurance requirements, and any penalty for defaulting on lease payments. Multiply the total monthly payment times the number of months in the lease to see what the approximate final cost will be.
Unfortunately, the law does not require the dealer to disclose all leasing costs. In addition, many lease agreements are ambiguously drafted with key provisions buried in the fine print.
If you want to lease, you should be diligent and read all the fine print. Read "Keys to Vehicle Leasing" by the Federal Reserve Board available at www.federalreserve.gov. Ask a lot of questions and get the answers in writing. If you want to know the interest rate on the lease, ask the dealer for the "money factor" or the "lease rate." Multiply that number by 24 and you'll get the approximate interest rate.
1 | 2