Related Info

• Budgeting and Saving
• Consumer Help and Tips
• Credit Report and Credit Score
• Dealing with Debt
• Family and Money
• Managing credit card debt
• Smart Shopping Tips
• Credit Counseling and Debt Counseling
• Housing Counseling
• Other Articles
• Helpful Links

The High Cost of Leasing a Car

If you are in the market for a new car, you have likely wondered whether you should buy or lease. Many people find leasing appealing because they can drive a new car all the time, and it even allows them the opportunity to drive a luxury or higher-end vehicle that they would not be able to otherwise afford. However, people can easily get caught up in a cycle of leasing, and though it may initially seem like a great option on the surface, leasing a car can come at a very high price.

High Fees at the End of a Car Lease

When you lease a car, you are essentially borrowing the vehicle for a set amount of time, typically three to five years. When your lease period is up, you can either return the car or purchase it. Either way, you will be faced with high costs and financial frustration.

If you choose to purchase the vehicle, your leasing company will offer you the vehicle at its residual value, which is an estimate of what the vehicle's value will be at the end of the lease terms and helps to determine your monthly lease payments.

If you choose to return the car, be prepared to get hit with several fees. The stipulations you agreed to when signing your lease are very difficult to adhere to. For instance, you will be charged fees for any excess wear and tear on the vehicle. Wear and tear is inevitable, particularly if the passengers in your car include pets and children, and it is at the leasing company's discretion to determine what constitutes “excess” wear and tear.

More Leasing Fees

Another fee to beware of involves the miles you put on the vehicle. Upon signing, you will have agreed to a certain mileage limit. The average agreed mileage is 10,000 If you exceed your mileage, you will be charged a fee for every mile over the limit and can be as much as 20 cents per mile. One never knows what life will throw at you and when you will need to use your car. You may have a family emergency that involves travel, thus adding miles. Or, you may end up moving or landing a new job that will increase your commute, again, adding miles you hadn't originally anticipated when you got your vehicle. You can opt to increase your mileage when you sign your lease, but higher mileage means higher monthly payments. Either way, you are in a lose-lose situation.

Although the short-term costs of leasing a car may be cheaper than buying, in the end, leasing is more expensive and makes less financial sense. If you need to weigh your options to determine what you can afford, contact Advantage CCS. Our counselors can offer you credit counseling, debt management and budget management tips as you shop for your new car.