What is a lease?
In simple terms, leasing a car is like renting it for a very long time. In most cases, you give the dealer a couple thousand dollars up front, and make a set payment each month for the duration of the lease. Leases run anywhere from one to five years, but three years is the most common lease period. At the end of the lease, you return the car, although many times you’ll have the option to buy it.
After you turn the car in, the dealer will sell it as a used car, so they want it to be in very good shape. Most leases have a mileage limit, which means that if you exceed that limit, you’ll have to pay a fee. Also, if there’s too much wear and tear on the car, expect to get hit with another charge.
At the end of many leases, you have the option to buy the car. If you think you may want to do this, you can and should negotiate the sales price at the start of the lease. If the car has lost a lot of value while you’ve been leasing it, you may end up overpaying for it at the end of the lease.
While leases certainly have their fair share of restrictions, there are still a few benefits. One is that the vehicle will be under warranty, and it is very unlikely that it will need expensive maintenance.
Why lease a car?
Leasing is a good option for people who like to get a new car every few years. A common reason people lease cars is that it allows them to drive a more expensive car that they wouldn’t be able to afford if they were buying it.
But leasing isn’t for everyone. If you drive a lot of miles each year, the extra mileage fees can offset any money you might save with a lease.
Leasing also isn’t the best way to save money in the long term. When you finance a car, you may have a higher monthly payment, but at the end of the finance term, your monthly payments end and you own the car. When a lease ends, your monthly payments end too, but you don’t own the car. That means you have to lease or buy another vehicle, and you won’t have a car to resell to help you pay for the next one. Leasing can decrease your monthly payments, but over time, you’ll likely spend more money than someone who buys a car and keeps it for years.
Some car companies have periodic leasing events. Volkswagen, for example, has a leasing event called “Sign Then Drive” every few months. The promotion features leases with no money due at signing on cars like the Jetta and Golf, for about $200 per month. General Motors, who makes Chevrolet, GMC, Buick and Cadillac models, also features lease deals from time to time, and even has special leases for previous GM owners or owners who are switching to GM from competing brands. The cheapest GM leases tend to be on Chevrolet vehicles. For example, you can generally get the Chevrolet Malibu, a midsize sedan, for about $200 a month with about $2,000 due at signing for a three-year lease, so long as you have the credit score to qualify. Most lease deals for mainstream sedans are about that much.
If you want something bigger, like an SUV, expect to pay more. Compact SUVs generally cost upwards of $250 per month to lease, with anywhere from no money due at signing (if there’s a special offer available) to $4,000 and more due at signing. Mazda typically offers its CX-5 compact SUV in the range of $219 per month to $329 per month, depending on how much of a down payment is required. When Honda offers leases on the CR-V compact SUV, the leases typically cost between $259 and $310 per month.
Make leasing work for you
Finding an inexpensive lease is more about patience than anything else, but you can do a few things to ease the process. Make sure your credit is in order. Usually, automakers’ advertised lease rates are for people with excellent credit. If you have bad credit, you’ll probably pay more than the advertised price. Also, remember that leases are negotiable, just like a purchase agreement. Don’t be afraid to negotiate the price of the vehicle or ask for a better deal. Do your research, negotiate well, and you may end up with a cheaper lease than you expected.