Misconceptions About Leasing
Misconception #1: Leasing a new car costs far more than buying it.
Leasing can actually cost less in the long run. Besides the lower up front costs and monthly payments of leasing, consider the economic power of money that's not put into the down payment and large monthly payments on a purchase deal. Investing that money or buying down debt could put you ahead financially, compared with tying up money in a vehicle, which is losing value.
In addition, most leases offer GAP insurance, which covers the difference between the lease payoff and the insurance settlement if the car is totaled or stolen. This is usually not available when you buy a vehicle.
Misconception #2: There's equity in buying, but nothing at the end of the lease.
Buying a new car is not typically a good investment, since the vehicle depreciates. Its value may be considered equity only if the amount owed on the loan is less than its value.
Leasing offers the potential for cash value at the end of its term as well--by keeping your equity out of the vehicle. The cash flow derived from no or a lower down payment and lower lease payments during the life of the lease, together with interest, can produce an amount roughly equal to the used vehicle's value at the end of a conventional loan.
Misconception #3: A lease consigns you to always making payments.
At the end of most leases, the contract entitles you to buy the vehicle at a set price. If you choose not to, you can just walk away. Had you purchased the car, you would be stuck with selling it or trading it in, at a price that may not meet your expectations.
Misconception #4: Excess wear and tear charges are unfair.
Regardless of leasing or buying your vehicle, you would face the same financial hit for wear and tear. The lease contract just puts that reality in black and white.
Misconception #5: Early termination fees exact a heavier penalty than changing your mind when you buy a car.
Whether you lease or take out a loan, the decision to bail out early comes at a price. If you purchased the vehicle, the loan balance may be far more than what the car is worth. If you leased, the vehicle may be worth far less than its residual value, particularly if you made no down payment. The lessor uses the early-termination fee to compensate for that loss.
Misconception #6: It's a mistake to lease if you put high mileage on a car.
High mileage takes its toll whether you lease or buy. When you buy, the cost comes as a lower trade-in value. When you lease, your cost is out of pocket when you turn in the car. To avoid such an expense at the end of a lease, Best Buy Auto Leasing will structure your lease to your driving habits using a realistic number of miles over the right number of months.