Depending on their finances, couples who opt for a lease could put a serious strain on their household budget, no matter how good the deal looks on paper.”Manufacturers like leasing because it’s a great way to keep people in their cars,” said Phil Reed, senior consumer advice editor for Edmunds.com. “However, it’s nothing more than another way of financing a vehicle and you’ll have to turn in the vehicle despite putting money into it.”
And for those used to getting something for their money, turning in the keys at the end of the term might be hardest of all.
To help couples young and old determine whether leasing a car is right for them, we’ve compiled 8 questions they need to ask each other before they sign on the dotted line.
Terminating a lease can get expensive and cost up to all the remaining payments of the term. The typical lease term is three years.
This means young couples facing life changes--from starting a family to switching careers and buying a home--will need to consider whether their needs are going to change within that time.
'If you're in the middle of a lease cycle, these changes can catch you unaware,' said Reed.
Lease terms typically allow for 36,000 miles of driving, or 12,000 miles per year. But what most drivers don't know is that if they exceed the annual mileage limit, they can be penalised by the mile, said Reed.
The average charge is 15 cents--not much, but it does add up.
'Check to see what's included in the lease,' said Reed, especially if you're spontaneous and like to take lots of road trips. In this case, buying a car is the safer bet.
Check out 12 tips for buying a new car in 2012.
If you work a prestigious job and need a new car that impresses clients, leasing offers lucrative benefits.
'There's a great business deduction for taxes,' said Reed, especially if you're someone who drives around a lot for work like a real estate agent.
Monthly costs are lower with leasing, but it isn't considered the most economical option long-term, said Reed. At the end of the lease, you'll need to get a new car and the cycle of payments will kick in all over again.
Three years is the optimal time-frame--unless higher maintenance fees and extended warranty costs aren't an issue. If that's the case, buy the car instead.
Remember: You can extend the lease of the car to lower your monthly payments, but you'll be throwing money at something you'll never own.
All new cars, whether you lease or buy them, come with a three-year bumper-to-bumper warranty. These cover regular wear and tear, but not serious repairs that tend to crop up down the road.
'Routine maintenance like tire rotations, brakes and tire changes you do have to pay for (if you're leasing),' said Reed, 'but you're not going to use up the brakes until you're done with the lease, and that's when the car becomes more expensive to repair or maintain.'
If paying for recurring car breakdowns isn't within budget, opt for the lease.
If you have good credit but no money for a down payment, you're a great candidate for leasing, Reed said:
'This would be a couple that doesn't have ready cash, but proof that they have a good payment history.'
Couples with a bad credit history, unfortunately, may not qualify for the leasing specials or be able to lease the car as cheaply as they would otherwise.
If you're driven to lease, hold off for a year or so until your credit score improves.
Being on a lease makes it easier to plan ahead for monthly expenditures. Young couples should be living within a budget anyway as they 'have more of a future to begin with,' Reed said.
If you're saving for a house, a solid financial investment, leasing might help you to manage your cash flow better since your cash won't be tied up in a car.
'When you lease, you only pay for what you get,' said Reed. 'When you buy a car, you buy its extended future right off the bat.'
If you're a creative couple that enjoys having a sense of ownership, leasing a car won't be right for you.
Modifying the sound system, rims and exhaust system is a hobby better suited to owners who can not only afford it--leasing generally offers lower monthly payments--but get away with it too.
A leased car belongs to the leasing company, so any tweaks, upgrades and colour swaps are off-limits.
If you're bent on owning, but short on cash, consider investing in a relatively new used car, said Reed. (Just watch out for shady scams.)
'This way you can get a higher level of a car at an earlier stage.'
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