Why Car Leases Can Be Good For First-Time Buyers

Pros and Cons of Leasing


Image
Photo Copyright: View Apart/Shutterstock
I had a caller to my radio show Saturday, wanting to purchase a car for his 21-year old son who was in college. I asked him if he had considered leasing a new car for him, to which he said no and seemed very leery of leasing overall, primarily because he had never done it. He made the comment ďafter 3-years, you donít own anythingĒ. He is correct, but if you finance for five, six, or seven years, you donít own anything after three years either. After a few minutes of chatting, he is going to look into it.

Leases and First-Time Buyers

Too often, people donít consider this option, but for many families, it makes a lot of sense for young people to lease, even first-time drivers, but certainly for those who are headed off to college or out into the workplace.

First, consider the lower cost of the purchase. Lease payments are often substantially lower on leases than finance contracts, especially 60-month loans. You are usually looking at no maintenance costs, just gas and a few oil changes. The leased car is almost always under warranty for the full term of the lease.

Car Loans VS Leasing

For me, the most important thing, as I explained to the caller, was that to young people, a standard loan will get them into a situation with no way out and it is common for their circumstances to change. A 21-year old single student could easily be married with children on the way just three years later. On a finance contract, they could easily be stuck with a car that is not usable to them.

As long as the young people stay within their mileage limits, and doesnít tear the car up or abuse it, we know that at the end of the lease they will at worst be breakeven in the car, at best will have equity to use for the next purchase. As a parent or relative, it is also a good idea to put them on the lease agreement as a co-buyer to establish credit for them, which will get you off the hook for the next loan or lease.

If you were going to pay cash for a car for the youngster, look into a pre-paid lease, you can save additional money and keep as much as 40-50 percent of your cash for other things.

Important Things To Consider

Are there things to be cautious of? Of course, the mileage limits are a big one. The standard mileage on a lease is 15,000 per year, but if your calculations show they will be driving less than that, you can set the miles lower to make the lease payment less.

Check with your insurance agent to see if leasing causes an increase in premiums, sometimes it does, so be sure to check that out.

This plan will not work for every situation, but for many, it will and those people will reap the plus sides of leasing.
Related Articles
What
What To Know About Pull-Ahead Lease Offers
Pull-Ahead Lease Programs
Over the last few years, these programs have become very popular with automakers, and are just another form of an incentive. It can vary, but generally if you are current... More ›
Keys
Keys To Determining and Maximizing Your Carís Resale Value
When I started my radio show 17 years ago, on show #1, I told the audience I would only recommend vehicles that had great long-term reliability, good value for the dollar, and good resale value. I ha... More ›
6
6 Reasons Senior Citizens Should Consider Leasing Over Buying
Weekly on the Car Pro Show, we have a number of callers who identify themselves as senior citizens who are considering leasing for the first time.

I explain on the air that as we age, our mobil... More ›
8
8 Car Leasing Terms To Know Before You Visit The Dealership
We had a caller last weekend who was confused about residual values on a lease, and whether that amount could be negotiated at the beginning or end of the lease.
One of the problems with the car b... More ›
There haven't been any comments left on this blog yet. Be the first to add one!.