When examining auto loan vs lease prices, you will discover each has its own drawbacks to coincide with the benefits. Many of these are balanced out by the pros, but they are still necessary to research thoroughly. This allows you to make the most intelligent and informed decisions possible about your new vehicle.
When you sign a leasing agreement, you become instantly responsible for any regular (routine) maintenance services and their associated costs out-of-pocket. Such services include oil changes, tire rotations, wheel alignments, brake replacements and replacing all non-working lights. Granted, if your leased vehicle experiences a breakdown due to faulty materials or craftsmanship, you are most likely not responsible for any charges related to those repair or replacement services.
Check your lease agreement thoroughly before signing, however, to fully understand the charges and services you are responsible for out-of-pocket. Additionally, if you get in an accident while driving your leased vehicle and are the at-fault driver, you will likely have to pay all associated repair and replacement costs, possibly including the full balance you still owe on the lease.
As stated above, lease agreements almost always include mileage allotment limitations. If you drive above the allotted number of miles, you will be charged extra when you turn in or trade-in your leased automobile. Sometimes these per-mile charges are reasonable. Often, they are not, however. This means you constantly must monitor how many miles you drive your leased vehicle to avoid paying out extra money when the term ends. This further means you will likely be limited in where you are able to travel, which limits your vacation and social options significantly.
Leasing automobiles is akin to renting apartments. You have limited flexibility in how you personalize the automobile. Your money’s gone at the conclusion of the lease term. Finally, there is always a risk of surprise or extra charges at trade-in time, which means you constantly have to think about the condition of your vehicle for the life of the lease.
Most of the existing cons pursuant to taking out an auto loan and buying your car are financial-based. For one example, auto loan down payment requirements are generally stricter than they are for leases. Vehicle loan monthly installment payments are also often higher than the payments required each month when leasing a vehicle. Lenders do hold collateral in the form of your automobile title until your loan is paid off in full. Still, lenders are taking a risk by allowing you to borrow money, and they charge you more for this service accordingly.
Additional cons pursuant to auto loans and vehicle ownership include:
- Vehicle values depreciate quickly, leaving you owing more money than your automobile is worth.
- Trade-ins are often not simple, and instead involve negotiating and haggling to get the best value for your old automobile.
- Auto loans require more time-consuming paperwork than lease agreements.
- All repair and replacement expenses not covered by insurance or a warranty are your responsibility out-of-pocket.