Lease? Buy? Walk?

A few years ago many people were still being enticed to lease rather than purchase cars by an automobile company advertising blitz and by low monthly lease fees.  When these leases come due owners will have to decide whether to just walk away from the deal, whether to renew the lease for another two or three years, or whether to purchase the vehicle at the price stipulated in the lease agreement.   Here are some some Abo and Company thoughts on the matter:

Whether to just let the lease terminate depends on a variety of factors including disposition fees, excess mileage charges, and excess wear and damage fees stipulated in the lease.  Disposition fees can usually be negotiated, and charges for excess wear and tear may be reduced by taking care of needed repairs before the car is turned over to the dealer.

• Compare the residual value or purchase price stated in the lease with the prices for similar used cars on the market.  If it is lower, and you have a purchase option, it is usually wise to exercise it.  Don’t forget to consider sales tax on the purchase in your analysis.

• Beware of a premature offer by the dealer to let you out of your lease and give you a new car at a similar monthly payments.  It may suggest that the dealer has an opportunity to gain more from selling the car to another buyer than can be obtained from you at the end of the lease.

• Before agreeing to extend a lease, compare the cost with the cost of leasing a similar new car.

Automobile leases are a complicated financial instrument that should be reviewed with your financial advisor, both before inception and at the time of termination.  Please check out the financial calculators on our website.