Leasing is an option in vehicle purchasing that many have heard about but few consider. Everyone knows someone who has a horror story on the subject; someone they know paid huge amounts of mileage penalties. Other folks claim that leasing just isn't worth it because we pay for a vehicle that we'll never own. Even more will swear that leasing is the devil because, well, they don't understand how it works. And, we all fear what we don't understand. Especially when it comes to money and large purchases. With all of these points in mind, let's take a look at leasing vs. financing and do some comparisons on each. What some people discover is that, once leasing is compared to financing, leasing a vehicle may well work more in their favor. Of course, there are some cases where leasing would not be as beneficial.   


To understand leasing, we must first get a basic grasp on financing. In short, financing a vehicle simply means that we are paying for our vehicle in monthly installments, over a set period of years. Once we have made all payments, we own the vehicle. Simple enough, right?

When leasing is looked at in this manner, it's not all that different. Leasing in its simplest form is this: leasing a vehicle means that we are paying for the time that we are using our vehicle. During this period we never own the vehicle, we are simply leasing a specified amount of time for our use. If we purchase a 39 month lease, we are paying for 39 months worth of usage of the vehicle, broken up into monthly installments. At the end of the lease term we have choice, trade the vehicle, buy the vehicle outright for the residual amount (what the leasing company says the vehicle is worth at the end of the lease term), or turn the vehicle back in to the leasing company. Where are the benefits in that, you ask? Let's take a closer look. 

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If we were to walk into a dealership assuming that a lease is the best option for us, we could be in for a rude awakening. There are many factors to consider when looking at a lease. For example, mileage driven per year, service intervals, duration of the lease, and whether we will trade the vehicle or turn it in at the end of the lease.

 If we are a person who keeps their vehicle five or more years before we make another purchase, leasing is not our best option. If we drive many more miles than the average person, leasing may not be our best option. However, if we trade quite frequently (every three years or sooner) if we enjoy peace of mind of a new vehicle warranty, and if we plan to trade every time we make a new vehicle purchase, leasing could be the better deal. Lastly, if we like the idea of a lower payment in comparison to financing, leasing could be the better deal. To further explain, let's break down how each scenario affects the decision to lease or not to lease.

1. Keeping your vehicle five or more years - Those drivers who keep their vehicles five years or more would not benefit from leasing. A lease is beneficial to those drivers who trade more frequently, and this is why lease terms are generally comprised of lower monthly terms.

2. Driving more than the average person - The average person typically drives 10,000 to 15,000 miles each year. Leases have a wide array of mileage options, and this average range is usually always covered. However, for those that drive excessively more than average leasing probably isn't beneficial.

3. Trading more frequently and constant warranty coverage - A great feature of leasing is the ability to drive a new car every few years, without packing inequity onto the currently owned vehicle. Once a lease matures, the vehicle is typically worth the residual amount and very little if any negative equity is carried over. Also, lower term leases allow drivers to always stay covered by a bumper-to-bumper warranty. This keeps repair costs to a minimum. In fact, most lease drivers simply change the oil and rotate tires on schedule and that is all that is ever needed.

4. Lower monthly payments than financing - Because lease payments are only installments for the time of use buyers have purchased, lease payments are typically lower than traditional financing installments. In short, leasing allows customers to get more vehicle for less cost per month.

All of this looks great on paper, but where do all of those "nightmare stories" come from that so many of us have heard? Let me explain. As you'll see, the nightmares weren't from leasing, but rather from a lack of understanding of the lease.

1. Turning a lease in while over the mileage allocation - Too many times, customers will turn leases in with excessive miles. While it is true that the penalty for excessive miles is steep (upwards of 0.15¢ per mile) simply trading the vehicle for another car, truck, or SUV will alleviate this issue. I say this, because most of the time the customer turning the leased vehicle in winds up buying another vehicle after the fact. Solve the mileage penalty by trading your lease in.

2. The lease is not worth the residual value at the end of the lease, and inequity is carried over - Inequity is not always a bad thing. However, if the inequity is a large amount it can be very difficult to get out from underneath. To keep this issue from occurring during a lease, take care of the vehicle. Have the routine maintenance performed on schedule. Do not smoke or eat in your vehicle. Don't carry large pets in your vehicle. Keep it clean, and inspect it for dents and dings. Have any repairs performed that are needed that are covered under warranty. This raises value significantly when the time arrives to trade.   

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As you can see, leasing definitely has instances where it's much more practical and beneficial than financing. However, leasing is not for everyone and needs to be researched before decisions are made, much like any large financial choice. I hope this article was informative and helpful as a reference point in leasing. As always, the easiest way to have any questions answered is to ask the proper person. Our financing department at Legacy Ford Lincoln can answer any questions pertaining to leasing, financing, warranties or any other inquiry you may have. Give us a call at 606-528-1904, shoot us an email or just drop by our dealership. Good luck with your shopping and research!

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