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Most leases are financed through the dealer. But long loans can be risky, and these buyers might find leasing to be a better option. Buying a car with a loan isn't the way to go if you want to drive a new car every couple of years. But then you end up financing both the new car and the remainder of your old car.
If your goal is to have low monthly payments and drive a new vehicle every few years with little hassle, then leasing may be worth the additional cost. Be sure, however, that you can live with all of the limitations on mileage, wear and tear, and the like. An automaker may also kick in extra rebates on a lease deal, ones not available to a loan customer. Generally, two back-to-back three-year leases will cost thousands more compared with buying a car with a loan or with cash and owning it over that same six-year period.
And the savings increase for car buyers if they continue to hold on to the car, say, for another three years for nine years total—even factoring expected maintenance and repairs. Whether you get your new car with cash, a loan, or a lease, you can save by choosing one that holds its value well, stays reliable , and gets good fuel economy. Many people assume that the monthly payment printed in a leasing ad is etched in stone. Be aware, though, that the best lease deals are available only to those with superb credit, and that they may only be cheap because the automaker is trying to clear the decks of slow-selling cars.
There are pros and cons to buying and leasing a new car. I owe my career to two fateful events: my father buying a Corvette and my purchase of an Audi A4 rather than a Chevy Tahoe. The Corvette jump-started my love of cars, and the Audi led me to automotive journalism, track days, and amateur car repair.
In my free time I cycle as much as possible, no matter the season. We respect your privacy. All email addresses you provide will be used just for sending this story. Leasing vs. Buying a New Car Comparing the two major finance choices. By Jon Linkov. Updated May 25, Photo: iStock.
More on Car Buying and Leasing. Trade-In Value Estimator. Best New Car Deals. To find out whether leasing or buying is right for you, we take a look at the pros and cons. The Upside of Leasing. The Major Advantages of Leasing You drive the car during its most trouble-free years. You're always driving a late-model vehicle that's usually covered by the manufacturer's new-car warranty. The lease may even include free oil changes and other scheduled maintenance.
But leases may not be as flexible as you think. If you get tired of your car or your needs change, you may want to think twice about turning the car in before the end of your lease. If you break your lease early , you could be on the hook to pay some steep penalties. You could even be required to cover all of the remaining lease payments and pay additional penalties on top of any other fees.
As a car buyer, you have more freedom to get rid of your vehicle. Not sure how frequently you plan to switch vehicles? Shopping for good rates and applying for prequalification could help you crunch the numbers and make a well-calculated decision.
Ultimately, the best choice for you depends on your preferences, your budget and your ability to handle the expenses you might incur down the road. Read this post in Spanish. Image: Smiling woman taking selfie with new car in showroom. You may also want to consider how much flexibility will matter to you down the road. Advertiser Disclosure We think it's important for you to understand how we make money. About the author: Sarah C. Brady is a San Francisco—based financial consultant, workshop facilitator and writer.
In her … Read more.
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