Buying a car can be very expensive which is why many people now choose to lease instead. While this may seem like a great idea, there are actually some hidden problems with leasing and it is usually better to buy.
Here we will show you why it might be better for you to avoid leasing cars and stick to buying – we will also help you decide when it is not such a bad idea to lease.
The downside of leasing
When you buy a car, that money you spend will be yours forever – whether the car value goes up or down. Even if your car is written off, your insurer will pay out its current market value. When you lease, you are getting a brand new car every few years so you will never get to see your money unless you sell it at the end (which is unlikely). The only way that money spent on leasing can ever be yours, is if you decide to buy out the lease. This does mean, however, that when your drivers' license expires, you will also lose all your money.
Insurance costs more when you lease
Most people are aware that insuring a brand new car is always more expensive for the first few years, but many are not aware of why this happens. Insurers may treat you as a high-risk driver if you have less than 3 years of experience or will simply determine the quote based on the fact that you are leasing a car.
You will also have to pay for all damage upfront before taking delivery of the vehicle, whether or not it is your fault. This could mean that you need to put down an additional security deposit which will be paid if there is any damage at all, even just a scratch. If the lease is taken out for 3 years, you will also need to pay insurance premiums three times over.
Loss of resale value when you lease
The main reason that you buy a car is that it represents good value for money. Even if the car has high mileage, depreciation means that your resale value should hold up fairly well. With leasing, you could be left with nothing at the end of your contract if you cannot afford to buy out the lease. Even when returning a leased car in good condition, you could still lose money because it has depreciated so much during your lease.
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Difficulties in transferring ownership when leasing
In order to take out a lease, you must have been the owner of a car for at least 6 months. This means that if you are hoping to sell your old car and buy a newer model, you will not be allowed to get another lease until 7 months after the sale. The leasing company could also request an explanation before allowing you to lease again within the first 6 months.