Top 10 Reasons Not to Lease a Car

From higher interest payments to limited mileage, here are the top 10 reasons why leasing a car is rarely a good idea.
Written by Sarah Gray
Reviewed by Melanie Reiff
Leases can seem like a great way to drive a new car for cheap, but between the thousands you wind up spending on something you can’t keep, the costs of maintenance, and the mileage limits, leasing is rarely your best option.
Leasing a car
can seem like a great deal—you get a shiny new car, the chance to get a new one every few years, and payments that are often lower than they would be for a car loan. For most people, this is the only benefit, and that’s why leasing is usually not your best option when it comes to getting a new car.
To help you understand why leasing isn’t all it’s cracked up to be, we bring you the top 10 reasons why you should not lease a new car. 

10. You can’t do much to customize a leased car

When you lease a car, the dealer expects to get it back in the same condition they gave it—minus expected
wear and tear
. This means that even minor modifications—like added
window tint
—will need to be removed prior to returning your leased vehicle. Any major modifications will lead to massive penalties.
Key Takeaway Even minor customizations could void your lease terms and lead to costly penalties. 

9. Even if you’re in an accident, your lease terms remain the same

Even if you total your car, your
car lease payment
will remain the same. That means that unless you have
gap coverage
, you’ll likely be paying a hefty sum to the dealership for a vehicle that is a total loss.

8. Registration fees and insurance are often more expensive

Depending on the state you live in, you may have to pay higher
vehicle registration
fees for a leased vehicle than for a purchased one. Plus, regardless of your state, your dealer will require you to carry higher limits on
full coverage car insurance
than would be required for a vehicle you own.

7. You have to pay for maintenance and repairs

A few manufacturers include maintenance and some
car repairs
in the cost of your lease, but most require you to foot the bill for all of that yourself. Plus, if you don’t keep to a
basic car maintenance schedule
, you could be subject to penalties at the end of your lease term.
Key Takeaway You have to pay for maintenance and repairs whether you lease or buy a vehicle, but at least when you buy, that money is being invested in an asset that you own.

6. You have to maintain the car in mint condition

When they lease you a car, the dealer will expect to get it back in pretty much the same condition they gave it to you in. Sure, they’ll allow for what's regarded as normal wear and tear on a leased car, but if you return the vehicle with any damage they determine to be excessive, you could be subject to some major penalties.

5. You’re limited on how many miles you can drive

Most leases limit the number of miles you can drive per year. You and your lender will agree on a mileage cap when you sign your lease. Drive more than that limit, and you’re looking at excess mileage fees.

4. Getting out early will cost you

To get out of a lease, you typically have to pay the balance owed on the lease terms in addition to a massive lease-break fee. There are ways to avoid this, but they all involve something that winds up benefitting the dealer more than you. 

3. You have nothing to put toward a new car at the end of your lease

When your lease is up, you walk away with nothing. Even if you choose to buy the car you leased, all those payments you’ve already made don’t go toward anything. To add insult to injury, you’re often subject to a lease disposition fee, so not only do you walk away empty-handed, you have to pay for the privilege!
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2. You pay more interest on a lease than on a purchase

Though your monthly payment may be lower on a lease than on a purchase, most of that payment will be going toward interest for a car that you don’t own. Paying high interest rates is never a good idea.

1. You spend thousands on something you’re just giving back

Leasing a car is a lot like renting an apartment. You spend hundreds of dollars a month for the privilege of use, but that money is NOT a down payment. If you want to buy your car at the end of your lease, you’ll likely end up spending several thousand more for it in total than if you’d just financed it outright. 
Key Takeaway Although driving a new car on a lease can be thrilling, you’ll have nothing to show for your investment at the end of a lease.

How leasing a car works

When you lease a car, you’re essentially paying for the privilege of using it—but that privilege comes with a lot of restrictions, including limited mileage. When you lease a car, a financing company actually purchases the vehicle from the dealer, then rents it to you for a predetermined length of time.
The process of leasing is nearly identical to that of purchasing, but you often end up with lower upfront costs and monthly payments with a lease, which makes them very tempting. But—and this is a really big “but”—while you save some money upfront and monthly, every penny of that money goes toward someone else’s bottom line. When your lease is up, you walk away with nothing.

Leasing v. Purchasing

While the processes to lease and buy a vehicle are nearly identical, there are a lot of differences in how the vehicle’s ownership is held and where restrictions apply. Take a look at this table to see some of the major differences between leasing and purchasing.
Your finance company owns the vehicle
You own the vehicle
Monthly payments
Payments are typically lower than on a purchase and are also split between principal and interest, but your finance company benefits from principal payments rather than you
Payments are typically higher than a lease with a percentage of each payment put toward your loan’s principal and a percentage toward interest
Limited mileage with fines assessed for additional miles driven over the limit
Unlimited mileage
Maintenance/Wear and Tear
You’re responsible for all maintenance and pay penalties for excess wear and tear or failure to maintain the vehicle
You’re responsible for maintenance but don’t have to worry about wear and tear
End of term
You can either finance the car you’ve been leasing or lease or buy another—either way, you’ll still have payments
You have no further payments and you own your car
Future value
This is one of the few plus-sides to a lease. The vehicle depreciates, but it doesn’t affect you financially. **But**, you don’t have any equity in the vehicle either
The vehicle will depreciate, but its cash value is all yours
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Is leasing ever a good idea?

Leasing can be a good idea for some people in certain situations. For example, if you own a small business and use your car for that business, you can often deduct the cost of the car on your taxes. This could come back to bite you in two ways, though:
  • If the lease-cost doesn’t put you over your standard deduction, you haven’t saved anything.
  • If you have to drive more than your allotted miles for your business, you’ll have to pay excess-mileage penalties.
Otherwise, a lease can be a viable option for someone who really values always having a new car and is comfortable knowing their payments are not an investment but just an expenditure. 
As you can probably see, leasing is rarely the best option, even if you do have disposable income to throw around. 

How to find affordable car insurance whether you buy or lease your vehicle

Whether you choose to buy or lease your next vehicle, you have to have
car insurance
, and
can help you find the best coverage at an affordable price.
Most people think a new insurance policy will add hundreds of dollars to their monthly spending. That’s not the case with renters insurance. For just a few bucks a month, you could save thousands of dollars if disaster strikes. 
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It depends. If you want to just walk away, you’ll have to buy out your lease by paying the remaining lease payments in a lump sum along with a fee to break the contract. Other options include swapping the lease by transferring it to another party or working with your dealer to trade in your lease on another new lease or new car purchase.
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