The biggest disadvantage of auto leasing is that you are committed to a lease contract for 24 to 48 months. Being locked into a set term can create risks for the consumer, primarily if the individual needs to get out of the lease before the lease term expires.
There are now options available that circumvent this core risk with leasing, by allowing people to actually transfer the remainder of their lease to someone else. These is known as a lease transfer or swap a lease or lease assumption, and is growing in popularity as not many individuals are aware of this option available.
The concept here is allowing the original lessor to bust or break an auto lease early, without being penalized for terminating the lease agreement early. They are essentially transferring the remainder of the leases financial obligations over to someone else. The person taking over the lease, is then known to have entered into a short term lease agreement, which offers many advantages and benefits than committing to a brand new lease.
The second disadvantage is of auto leasing is in the long run, the individual will end up spending more money to lease, than financing via a loan to buy the vehicle. This however may not be a disadvantage to some people, as by not taking full ownership of the vehicle, they do not incur the massive depreciating value that vehicles hold. Buy what appreciates, rent or lease that depreciates.
Therefore if the individual is entering a lease with the intention of short-term ownership, and comfortable to pay more in return for not taking ownership of a depreciating value asset or the additional costs they’ll incur on maintenance and repairs once the warranty expires, then leasing is a great option. Plus, the individual may have the option to do a lease transfer at anytime if they decide they would prefer to end a lease early.
If the individual has the full intention to not assume the vehicle lease for the full term of the lease agreement, they may then find it very advantages to consider a short term lease through taking over the remainder of someone else’s lease agreement.
To quickly summarize the disadvantages of leasing:
- Commitment to monthly payments for 24, 36 or 48 year contract
- Higher fixed costs per month, over buying a car
- No ownership value of the vehicle when the lease term is done.
These disadvantages to leasing is not to deter you from considering leasing as an option. There are numerous advantages to auto leasing that may be a good fit for your needs. To understand if leasing is right for you, is a personal decision.
Other leasing tips to be aware:
- When choosing to lease a vehicle, do not inform the dealership if your intention is to buy or lease, until you’ve negotiated a fair purchase price for the vehicle. This will help protect the individual from allowing the lease term to hide the actual value of the vehicle, and prevent the dealership from up-selling unnecessary wear and tear costs. .
- Determine if the monthly lease payments are affordable for you over the term of the lease agreement.
- A dealer may present you with a car lease vs. car loan comparison in which he or she will claim that it illustrates that one is better than the other. This is bunk. Never trust a car lease vs. car loan comparison. They are almost always rigged, and are potential set-ups for the Secret Price Hike or the Disappearing Trade-In.
While these disadvantages of leasing a car seem sober with the comittment required over the term of the lease, there are opportunies to break the lease agreement early, with no financial penalities incurred. This is technically known as a lease assumption, or more commonly known as a lease transfer.
Next: What is a lease assumption?