Understand your options when leasing a car

Should you lease, or buy your car?

GOLDEN VALLEY, Minn. - More consumers are turning to leasing to help them afford higher priced vehicles.

The average vehicle lease payment was $120 less than the average finance payment in 2016; and SUV sales surpassed passenger car sales for the first time ever in 2016.

Dan Ament, Financial Advisor with Morgan Stanley joined us on KARE 11 Sunrise to discuss the importance of understanding your lease terms before signing on the dotted line.

Dan suggests starting by researching all available incentives and rebates to help you save. You'll also want to learn the lease terminology. Look up terms like "cap cost," "residual value," "buy-out price" and others.

There are pros and cons to leasing. "You're always driving a late-model vehicle that's usually covered by the manufacturer's warranty," Ament said. "Lease payments are typically lower than loan payments because you're paying only for the vehicle's depreciation during the lease term, plus interest charges, taxes, and fees. The future market value of the vehicle doesn't affect you financially. You can return the vehicle at lease-end, pay any end-of-lease costs, and walk away."

As for the drawbacks, Ament said, "You'll always have a payment and you won't own your vehicle (unless you 'buy out' the lease). If you end the lease early, early-termination charges can be costly. Leases limit the number of miles you may drive, which can be a large factor in determining your monthly lease cost and can be costly when your lease ends if you have excess mileage. You are essentially paying for the most expensive years before a vehicle depreciates.  You are unable to customize your vehicle.  At the end of the lease (typically two to four years), you'll have to finance the purchase of the car or lease or buy another."

If you're still debating whether to buy or lease, you can use a "buy vs. lease" calculator online to compare the overall cost, like this one from Bankrate.com.

© 2017 KARE-TV


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