KTLA Morning News car correspondent Michael Caudill relieves your stress about leasing a car. Breathe. Drive. Repeat.
For those who think leasing is a big mystery, Michael Caudill, president of Driven Communications and car correspondent for KTLA's Morning News, solves this oft pondered buying a car formula.
What's the difference between buying and leasing a car?
Well, the biggest difference between buying and leasing is quite simple. If you are looking to be in a car long term, say 5-10 years, then buying a car is the right thing for you. If you are only looking to be in a car for the next two to three years, then leasing might be the better answer.
What are some reasons consumers choose to lease rather than buy? Why would a sales person try to lead you into leasing?
Leasing is a good option for the person that likes to drive a new car every few years. Whether for business or for pleasure, leasing allows a customer to buy a little more car for the money as well. From a financial standpoint, leasing is a great option for the small business owner because of the ability to write off a significant percentage of the lease payment.
What do you need to know about a lease contract?
Lease contracts come down to a few very important items that the consumer must pay close attention to. 1) Know the terms of your lease. Is it 24 or 36? 2) How many miles can you drive a year? Mileage, if not monitored could really hurt you in the pocket book if you are not careful because if you go over your mileage, the dealership will charge you additionally by the mile. 3) Warranty and Maintenance. Some dealerships provide lease paying customers with free oil and tire rotation, along with other service benefits.
What are "wear and tear" costs? Why does it matter?
Dealerships are getting better with "wear and tear" costs, but some dealers still charge the customer for new brakes and tires, which are two of the biggest items that fall under the "wear and tear" cost. BMW dealerships have one of the best lease programs from the standpoint of service. Oil, tire rotations, brakes are all covered under the lease contract. These costs DO matter because at the end of your lease...you want to be able to return your car in great shape.
What about lease payments? How does it work, how much will you pay and how much will you owe at the end of your lease?
Lease payments allow you to get more car for less money...right? Well, that is true unless you want to buy it out right at the end. Then you will have to pay a small premium to keep the car. Most dealers will negotiate the lease down payment to a certain point, but once the payment gets too low, they will not be able to budge. Generally, lease payments are pretty fair and for the most part...you will not want the car at the end of the terms because there will likely be a newer model that you'll be able to lease as well.
When/why should a consumer consider "gap insurance"?
Gap Insurance is one of those options all customers have when buying or leasing a car. It's not for everyone, but is an additional insurance option that will protect the customer in the event of loss or theft of their vehicle. If you are financing your vehicle for more than 24 months or leasing a car, drive a car that is recognized for being on the top "stolen" cars list, or if you owe more than the vehicle is worth...then you might consider Gap Protection.
Should you buy your leased car at the end of the contract? Or, is it better to just dump it and get a new one?
It's better to start new, that is, unless you really love the car. You'll be able to "get more car" again for the money with a new lease or buying a new car. It doesn't make financial sense to buy it outright.
