Who should Lease a Car?

Although you may be attracted to the many benefits of leasing, you should consider the questions below before making a decision. If you answer "yes" to any of the questions, it's a good indicator that leasing a car may not be right for you. To do otherwise could cause you a great deal of unhappiness and unnecessary financial pain.

Do you think there is a chance you'll want to end your car lease early?
Lease contracts are purposely written to discourage, even prevent, early termination. To do so usually means you'll pay termination charges and all remaining payments. Therefore, if you lease, you should have a stable lifestyle and a good job situation to minimize the possibility of needing to terminate early. Wanting or needing to end a lease early is the most common problem people have with leasing.

Do you typically drive your cars more than 15,000 miles a year?
Lease contracts limit the number of miles you can drive to 10,000-15,000 miles per year. If you exceed your limit, you're slapped with "excess mileage" charges at the end of the lease. Sometimes, additional miles — if you know you'll be driving more — can be "bought" up front at the time you sign your lease, at a lower per-mile cost.

Do you mistreat your cars or fail to keep them in good condition?
Car leasing companies require that you return their car at the end of the lease with no more than "normal" wear-and-tear. Anything more and you'll pay for the damages. You are responsible for insurance, upkeep, and maintenance just as with a purchased car. Some people mistakenly believe the leasing company is responsible.

Do you think you'll want to customize your car, make modifications, or repaint it?
A leased car doesn't belong to you, it belongs to the leasing company. Therefore, you cannot make modifications and install custom equipment that alters the car. If you do, you'll likely be charged for the cost of repairs to undo what you've done.

Do you prefer "fad" cars or cars that frequently change style?
These types of cars usually lose resale value quickly, which means their lease "residual" value is lower. Low residual value translates into higher monthly lease payments. This kind of car could easily have a higher monthly lease payment than a more expensive car with a better resale history.

Are you emotionally attached to the idea of owning your vehicle?
When you lease, you never have ownership, unless you choose to buy at lease-end — which about a third of all leasers do. Leasing is not all that different than buying with a loan, in which case the bank holds the title and you don't own your car until the loan is paid off. It's just that, when buying, you build up equity because of your higher monthly payments and, when leasing you don't.

Do you like paying off your loans and driving your cars until the wheels fall off?
One of the benefits of leasing is that you can drive a new car every two, three, or four years. However, you'll always be making payments. To many people, this is an acceptable tradeoff considering the benefit of always having a new car that is always under warranty. And you still have the option to buy at the end of the lease if you really want to get a respite from those payments.

Do you have a flawed credit rating?
Because leases typically require a smaller down payment and lower monthly payments, you generally must have a better credit rating than would be required for a loan because of the higher risk to the lease provider. If you have a history of making credit payments promptly and don't have an excessive debt load, you're going to be fine. Otherwise, you may have to pay a higher interest rate to lease or, worse, be refused. (You can check your credit "score" at Equifax)