7 Disadvantages of Auto Leasing
Leasing a car is not the best choice for everyone, as you’ll never get to own the car. Below are some disadvantages to leasing a car.
1. Constant Car Payment
One of the significant pitfalls of auto leasing is that you will always have a car payment to make. Usually, plenty of lease contracts are about two or three years long. You will constantly have to keep looking for a vehicle to lease every couple of years unless you choose to be vehicle-free, or you choose to buy a car. While the monthly payments on a lease are significantly lower than purchasing a new vehicle, constantly making car payments may not be a viable solution.
2. High Insurance Costs
You will be charged a higher insurance cost when you insure a leased vehicle. This is because most, if not all, leasing companies need to get high insurance liability coverage on the vehicle. As a result, you will end up paying higher insurance than you would have paid if you had bought a car instead.
3. Mileage Limit
When you lease a vehicle, there’s often a mileage limit you have to adhere to per year. Usually, the mileage limit is in place to reduce the wear and tear of the vehicle since it will be resold when you return it at the end of your lease term. The typical range for most lease companies falls between 10,000 miles to 15,000 miles yearly. You will be penalized at a high rate if you exceed the set mileage limit.
4. You Can’t Make Modifications on a Leased Vehicle
When a company leases a vehicle to you, you have to return it in stock condition. This is because lease companies usually sell the car afterward as a pre-owned vehicle. Therefore, they need the car to be in good condition. Plus, the car needs to have its original equipment. If you modify your leased vehicle, you will likely be charged an additional fee when you return it.
5. Getting Out of a Lease Is Hard
Auto leases are quite binding, so getting out of one can be difficult. You have to pay off everything you owe to get out of it. Otherwise, you will be stuck with the vehicle until the end of the agreed term. Alternatively, you can find someone else and have that person take over your lease. It’s also worth noting that you will be charged early termination fees when you end your lease early, and you will have to pay the balance in a lump sum.
6. Needs Good Credit
If you have bad credit, you may not stand a chance at auto leasing. The majority of leasing companies usually have a high credit score requirement. Your credit score also significantly influences your leasing interest rate, meaning if you have a poor credit score, you will be charged higher monthly payments than someone with a good credit score.
7. You Will Pay a Lot of Fees
Auto leasing involves paying so many fees it can be overwhelming. For instance, a $200 disposition fee is required at the end of your lease as well as a $400 acquisition fee. Additionally, there are other fees you may be charged, like a wear and tear fee when you return the vehicle. It’s not uncommon for a leasing company to charge you a high fee for a small scratch. Therefore, you have to be careful when using the vehicle during your lease term.