Question 1

Is it better to lease or buy a car?

Accepted Answer

Buy if: You drive over 12,000-15,000 miles/year, keep cars 5+ years, want to build equity, or modify your vehicle. Buying costs more upfront but builds ownership value. Lease if: You drive under 12,000 miles/year, want a new car every 2-3 years, prefer lower monthly payments, or need business tax deductions. Leasing offers flexibility but you never own the vehicle. Over 6 years, buying saves $5,000-15,000 compared to back-to-back leases, but leasing provides newer cars with warranty coverage and lower monthly costs.

Question 2

What are the disadvantages of leasing a car?

Accepted Answer

Major lease disadvantages: 1) Never own the car - no equity built. 2) Mileage limits: Typically 10,000-15,000 miles/year, $0.15-0.30/mile overage fees ($750-1,500 for 5,000 excess miles). 3) Wear and tear charges: $500-2,000+ at lease end for damage beyond normal wear. 4) Early termination penalties: Can cost $3,000-10,000+ to exit early. 5) Continuous payments: When lease ends, you need another lease or car payment. 6) No modifications allowed. 7) Must maintain full insurance coverage. 8) Total cost over time: 6 years of leasing costs $5,000-15,000 more than buying.

Question 3

Why is leasing a car a waste of money?

Accepted Answer

Leasing can be financially inefficient because: 1) You pay for a car's fastest depreciation period without building equity. 2) After 3 years of $400/month payments ($14,400 total), you own nothing. 3) Continuous cycle: When lease ends, you start over with new payments. 4) Over 9 years: Leasing 3 times costs $40,000-50,000 with no car to show. Buying costs $30,000-40,000 but you own a paid-off car worth $8,000-12,000. However, leasing isn't always waste - it makes sense for businesses (tax deductions), low-mileage drivers who want new cars, or those who value warranty coverage and latest technology.

Question 4

How much should I pay for a lease per month?

Accepted Answer

Typical lease payments by vehicle type: Economy cars ($20,000-25,000 MSRP): $200-300/month. Midsize sedans ($25,000-35,000 MSRP): $300-450/month. Compact SUVs ($30,000-40,000 MSRP): $350-500/month. Luxury cars ($45,000-60,000 MSRP): $500-750/month. Luxury SUVs ($60,000+ MSRP): $700-1,200+/month. Target 1% rule: Monthly payment should be roughly 1% of MSRP with $2,000-3,000 down. Example: $30,000 car = $300/month. Negotiate based on selling price (not monthly payment), get multiple dealer quotes, and aim for lease factor (money factor) under 0.0020 (equivalent to ~5% APR).

Question 5

Can you buy a car after leasing it?

Accepted Answer

Yes, most leases include a buyout option at lease end. The buyout price (residual value) is set in your lease contract - typically 50-60% of original MSRP after 3 years. Example: $30,000 car, $18,000 residual. You can: 1) Pay cash for the buyout price. 2) Finance the buyout with an auto loan. 3) Trade it to any dealer (not just the leasing dealer). Whether to buy depends on market value vs. residual. If the car is worth $20,000 but residual is $18,000, buying makes sense. If worth $16,000 but residual is $18,000, return it instead. Check current market value using Kelley Blue Book or Edmunds before deciding.

Question 6

What happens if you go over miles on a lease?

Accepted Answer

Going over lease mileage triggers excess mileage charges at lease end. Typical penalties: $0.15-0.30 per mile over the limit. Examples: 5,000 miles over at $0.20/mile = $1,000 fee. 10,000 miles over at $0.25/mile = $2,500 fee. If you're nearing your limit: 1) Buy extra miles before lease end ($0.10-0.15/mile, cheaper than overage). 2) Buy the vehicle at lease end (no mileage penalty). 3) Trade early to a dealer who can absorb the penalty. 4) Extend the lease (some lenders allow this). To avoid: Track miles monthly, negotiate higher mileage upfront (costs $20-40/month for extra 5,000 miles/year), or choose buying instead of leasing.

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