What Does it Mean to Lease a Car?

Leasing a new car can provide significant savings versus buying a vehicle using cash or financing. While this concept isn’t new, the trend toward leasing continues to gain popularity among shoppers for many reasons. Shorter commitments, lower payments, and lower maintenance costs lead the list.

As this trend continues, rumors and opinions circulate, confusing the general public regarding the pros and cons of leasing. Savvy buyers understand these opinions often have little factual basis. Your needs, wants, budget, and the type of lease should drive your decision. To help, we asked our lease experts to review the process and clear up the misconceptions.

What Is Leasing?

Leasing has many similarities to buying, with several key differences. First, when you lease, you pay for the privilege of driving the car. You don’t actually own it and may never unless your lease includes an option to buy. You sign an agreement to make monthly payments for a specific time.

Dealerships typically include vehicle maintenance costs in the lease, lowering your price to drive a leased vehicle versus a loan. You turn the car in at the end of your lease and can pursue a new arrangement.

Leasing vs. Financing

Like any financial arrangement, you have to consider the details. Leasing makes sense for a lot of different reasons, and there are several pros to leasing versus financing.

Leases Have Shorter Commitments

Your commitment with a lease typically lasts two to three years, at which point you can buy the vehicle if you have the option. Otherwise, you turn in the car and lease or purchase another vehicle.

When you take out a loan for a new car, you don’t actually own it. However, every monthly payment you make builds equity in your vehicle. Car loans can last three to seven years, requiring you to commit to the terms and car for much longer than leases.

Leases Have Lower Monthly Payments

Leases can cost hundreds of dollars less per month than a loan payment on the same vehicle. Lower monthly payments appeal to budget-conscious shoppers. A lower monthly payment also allows you to afford a more expensive car.

Leases Cost Less to Maintain

New vehicles have a factory warranty for at least 36 months, which means your leased vehicle will have complete warranty protection. Many lease deals have strict maintenance requirements, which help the dealership protect its investment. Since the dealership owns the car, it’s typically necessary to get maintenance performed at the dealership you’re leasing from. However, many leases include routine maintenance, so you won’t have to pay extra for oil changes, tire rotations, and other qualified services.

You’re responsible for maintaining your financed car, truck, or SUV. You can take your vehicle to the dealership or any mechanic. In this scenario, you pay for all these services, making the cost of maintaining your car higher than a lease.

How To Know if Leasing Is Right for Me

Leasing a vehicle gets you into a new car at a lower monthly cost than buying. If you want to stay within a monthly budget, leasing a car will help you stay on budget. Our finance department managers can help you review your budget and find a great deal that fits.

It’s important to remember that leasing doesn’t build equity. Instead, you get to drive the car and turn it in at the end of the term. This can result in a cycle of leasing where you never build equity. However, if you continue trading in your leased car for another leased vehicle at the end of each term, you always drive the newest model with the latest features and technology. Many drivers love this part of leasing, and if this sounds like you, leasing may make sense.

Financing a vehicle builds equity. Once you pay off the loan, you own the vehicle. Some owners continue to drive their cars and enjoy no monthly payments. Others prefer to trade it in for the purchase of a newer model. And you can always sell the car and use the money for something else. If you consider your car an investment, financing may make more sense.

Lease Considerations

Leasing a new car can be a great way to drive a new vehicle at a lower monthly cost. You get warranty protection and avoid most maintenance expenses. However, you must factor in some lease conditions that could affect you.

First, a lease has a limited number of miles you can drive before you have to pay extra. For example, if you sign a two-year lease with a 20,000-mile limit and drive 25,000 miles, you pay a surcharge for the 5,000 miles over your limit when you turn it in. This could cost as much as 25 cents per mile. In this scenario, you’d owe $1,250 to the dealership.

We recommend you calculate your mileage carefully before signing a lease. Most dealerships will negotiate the allotted miles upfront, although your monthly lease payment will increase the higher you go.

Unfortunately, you won’t receive a credit if you turn your leased vehicle in with less than your allotted miles. However, if you plan on driving less than the average lease allotment, you can negotiate a lower number and save money on your monthly payment. Overlooking this small detail could cost you a lot of money.

You must also turn in the car in good condition, with less normal wear and tear. The lessee must pay for any repairs considered outside the norm. Tiny scratches or dings may not cost you anything. However, if you have significant damage, you will receive a bill from the dealership when you turn in your car. This could get expensive, depending on the damage.

Explore Your Lease Options Today at Classic Toyota

At Classic Toyota in Tyler, Texas, we have an expansive inventory of new Toyota cars, trucks, and SUVs available to lease at attractive rates. We invite you to browse our new inventory online and see if any vehicles interest you. Once you decide on a car you like, you can visit our Tyler showroom and speak with one of our lease experts. They’ll answer your questions, let you take your preferred vehicle for a test drive, and walk you through the lease process.

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