Ah, I remember that new car smell like it was just yesterday. I remember driving my 2008 fully loaded Pontiac G6 GT off the lot and immediately driving it to my buddy’s house to show it off. “Check out the sun roof. Listen to this sound system. Dude – the windows adjust further after you close the door….it makes an air-tight seal or something like that.”
That car was so cool…..for about four years. Then, it happened. Like a relationship turning sour, I started disliking my car. The seat came off the track. The carpet started smelling like a gym locker room. The leather started cracking. Washing and waxing went from being a mini man-cation to being about as fun as washing the dog. And one day, I just kind of fell out of love.
It begs the question whether I’m the right guy to own a car, or if I’d be better leasing. So let’s break down the benefits and drawbacks of both.
First, think of leasing like you would renting an apartment: You lock in to a contract for a couple of years and you make a monthly payment – but you don’t own it. You can get out early, but there’s typically an early termination charge. You’ve got to put down some cash and you’re responsible at the end of the term for any damage to the car.
Think about it though. If the hot water heater goes and you’re a homeowner (or you’re no longer covered under vehicle warranty) – it’s on you to replace it. Because your average lease term is 36 months, assuming you don’t exceed the mileage you’ll always be covered under warranty.
The average new car loan is five years. That means that after three, you’re only going to be covered under a power train warranty. With a lease of two to three years, you can return the car and move onto a new one at the end of the term.
One of our sales guys from Carter Chevrolet and Mazda of Manchester, Jimmy Fuska, put it very simply. “Kyle,” he said. “Why wouldn’t you consider leasing? You only pay for what you use. Put on a ton of mileage? Get a lease with a ton of miles.”
Hmm – I’m intrigued. Let’s look at some other perks of leasing:
- It’ll almost always cost you less money. The down payment is usually lower, as are the monthly payments. That means you can either save money or lease a higher end vehicle with more options.
- You’re always driving a relatively new vehicle.
- You know what your vehicle expenses are going to be – there are no massive service expenses that aren’t going to be covered.
- You have a guaranteed future purchase price of the vehicle.
- You only pay sales tax on your “use” of the vehicle, as opposed to paying sales tax on the purchase of the entire vehicle.
With all of these leasing perks, why would anyone purchase? Here are a few reasons:
- After five years (or whatever your loan length is), the car is yours. When you’re done paying it off, you can use that equity to trade up….or of course you can continue driving around without a car payment.
- The car can be used as collateral and help you secure a bigger loan down the road, such as a mortgage.
- If your kids love the car more than you do and end up trashing it with ice cream cones, muddy cleats, Lassie, and firecrackers (sorry about that, mom – I was 7, ok?), nobody is going to come looking for more money from you at the end of your “term”. Now with that being said, certain leases – like Mazda’s – give $1,000 in wear and tear (excludes Jersey shore level partying in that sweet new Mazda3).
- You can rack up as many miles as you’d like. You don’t have to worry about the per-mile fees once you pass your lease contract. That means not only can you make countless trips to the grocery store for Ben & Jerry’s….but you don’t have to think twice about driving up to their Vermont factory and making it yourself!
- Another interesting fact: the majority of people purchasing vehicles actually trade them in between 48 and 54 months….shy of the total length of an average five year loan.
Kyle S. Reyes iz Director of Marketing at Carter of Manchester.