Last updated on November 18, 2019 at 12:11 pm
You’re excited; it’s time to buy a new car! There is a lot to think about, the color, the make, the model, the price, car insurance and of course, should I buy or lease?
If you are thinking of leasing your next car, there are some questions you can ask yourself that should help you make the right choice for your unique situation.
- Consider how long you are planning to keep the car. When you consider leasing, think about it as being like a long term rental. Since most leases cover two to four year periods, if you plan to have the same car for more than five years, buying it probably makes more sense than leasing. You should, at the same time, recognize the length of the warranty and try not to agree to a lease that extends longer than that!
- Consider how much driving you will be doing throughout the terms of the lease. Sometimes a contract has a low monthly payment because of the low mileage limits – often between 12,000-15,000 miles per year. If you consistently exceed those limits, you may be charged anywhere from 18-25 cents per mile at the end of the lease. That extra charge can add up quickly if you are going to significantly exceed the limit, making leasing a less attractive alternative for you.
- Consider the penalty you could face for any damage that goes beyond normal ‘wear and tear.’ You can, of course, fix the damage prior to turning the car in at the end of the lease, but if you don’t you should realize that the lease-end guidelines may not work in your favor.
- Consider the additional one-time costs attached to leasing, such as a lease acquisition fee and a disposition fee. While neither is very high (typically around $500 each), they shouldn’t be overlooked. In addition, there may be a security deposit of one month’s payment required along with the suggestion for ‘gap insurance’ to protect you in the event the car is stolen or completely totaled in an accident.
So, if you prefer a new vehicle every three to four years, value the automakers bumper-to-bumper warranty and drive 15,000 miles or less each year, you may be able to minimize your monthly payments by opting to lease.
Talk to your accountant about the benefits of leasing versus buying, especially if your business will be making these payments on your behalf. Have more questions? Plymouth Rock in New Jersey wants to hear them. Leave a comment or tweet us!
Ken Bagner is a member of Sobel & Co. LLC. He is a member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. Plymouth Rock Assurance is proud to partner with NJSCPA to bring you valuable tips for about your financial health. Qualified members of the NJSCPA can receive a discount on their car insurance through Plymouth Rock Assurance New Jersey.