Leasing has become an increasingly popular means of financing a set
of wheels. But it can be complicated, and lessors have in the past
taken advantage of unsuspecting lessees. That's why Congress passed
the Consumer Leasing Act in 1976. Now, there are a number of good
resources that can help you understand car leasing better, and will
remind you of your rights and responsibilities should you choose to
become a vehicle lessee.
The best resource is the
Federal Reserve's Leasing Guide. Other helpful
resources include the
Association of Consumer Vehicle Lessors, the
National Vehicle Leasing Association, and the
American Financial Services Association Education Foundation.
If you're thinking about leasing a car, consider these questions:
Then make sure that you're aware of the advantages and disadvantages
of leasing over buying. Some of the benefits of leasing over buying:
- How long will you keep the car? If you only want to have the car
for 2-3 years, leasing may be a good option.
- How much do you value the warm, fuzzy feeling of ownership?
- Is cost a concern, or do you have plenty of extra cash in the bank
and at the end of the month?
- How much do you drive? If you drive more than 15,000 miles,
you'll have to pay for extra miles on a leased car.
- Do you take care of your car? If you park at the end of the
grocery store parking lot, preferring to walk half a mile than risk
shopping-cart dents in your car, you probably won't get hit with the
beyond-wear-and-tear charges that lessors impose at the end of the lease.
- Are your circumstances likely to change? If you're thinking
about joining the Peace Corp, quitting your job to become a traveling
musician, or becoming a full-time public transport commuter, you'll find
it hard to get out of a lease early.
Some of the downsides of leasing over buying:
- Your monthly payment for a particular car will be lower.
- Your down payment for a particular car will be smaller (you may not have to put any money down).
- You won't have to deal with the hassle of selling the car when you're ready for a new one.
- Leasing is more complicated. The resources mentioned earlier will help you navigate the leasing process,
but nonetheless, leasing a car is more complicated than buying a car.
- You won't own anything at the end of the payment term.
- You'll always have a car payment (as long as you keep re-leasing).
- If your circumstances change and you have to get out of the lease early, it can be very expensive.
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