Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Should I lease a vehicle? What are the hidden costs?
What are some of the hidden costs in leasing a vehicle, and how does a person figure out if leasing is the right way for them to go in terms of filling their transportation needs?
Suzanne Kincaid:
expert info »
The biggest cost may come at [the] end of [the] lease when you turn in the vehicle, if your contract has a mileage clause in it that allows only a set amount of miles each year, which most leases have. This charge can be very high for each mile over that set amount. If you drive more than 15,000 miles per year, a leased vehicle may not be best for you. Since you never own the vehicle at the end of a lease, you may also be charged for the change in the market value of the vehicle at [the] time you turn in the vehicle. Most leases now have an agreed [upon] price at the end, but you may still be liable for the condition [of the car when you turn it in] and may end up paying for any damages that affect the market value [of the leased car].
Alyssa Rakovich:
expert info »
It depends on your needs and how much mileage you put on a car. If you like the newest model each year and put limited miles on a car, leasing might be a good option. Look at the contract and the costs involved if you go over the miles. What is the cost of maintenance, oil changes, etc? Do they cover all costs? Ask the questions you need answered to feel comfortable with you decision. All costs should be in the contract.
Jeff Kyle:
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Leasing is a way to get into a vehicle that is more expensive than you can actually afford. I did this once & it was a big mistake! One of the “hidden” problems is when it’s time to turn the vehicle back in, you may be over the allowed mileage. If you are [over the allowed mileage] (as I was) you can either turn in the vehicle & pay a per mile charge (mine would have been $5,000) or take out a loan & buy the vehicle (which is what I did & incurred a $410 per month payment for the next 3 years). My advice would be to save up cash & pay cash for a nicer used vehicle (which is what I did with my last vehicle). It looks good, it’s reliable and I have no monthly payments!
Elizabeth Goldsmith:
expert info »
Leasing means renting, so you are not building equity, so it is not an investment. Most financial experts do not recommend leasing for that reason. You have payments, and nothing to sell. But leasing can make sense if [you are] in a temporary location or in an occupation where having a new car every 3 years (the normal length of most leases) is desirable or you are a person who doesn't like the hassle of buying and selling cars, or best of all worlds, your employer pays for a leased car. What to look for in a lease? Find out the typical mileage (what you usually drive vs. what is covered in the contract). If it is 12,000 miles a year times 3, when you turn in the car, if it has over 36,000 miles on it, there will be an extra charge. Also find out about damages and what is covered. Your car insurance should be considered. Is there a special deal if you lease or buy from the same dealership or company? What happens if you change your mind and want to end the lease?
Anne Delle Donne:
expert info »
Although I have never leased a vehicle, I understand the following to be true: 1) if you go over approximately 12K in mileage in a given year, you will pay extra for the additional miles you used. This can get expensive if you are not careful. 2) Leasing allows for a person to own a brand new vehicle with (hopefully) little to no repair needs, where you get to drive a car with the latest technology. 3) When you trade in the vehicle, you have no "trade-in" value, so the money you spent each month only pays for the cost to use the car and depreciation. You build no asset base to use when you replace the vehicle. It is a great option for those who want the higher-end car, little to no repairs, and want to have a NEW car every 2-3 years. This will get expensive over time, as you will end up just paying the depreciation on the car and will never have a "trade-in value" to put down on an additional car purchase.