The Top 10 Reasons not to Lease a Car (and Buy Instead)

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    When my husband and I moved in together, he was leasing his vehicle. Needless to say, it was effortless to come up with more than 10 reasons not to lease a car after dealing with the aftermath of returning it.

    Having owned outright and tried a leased vehicle, we learned quickly how leasing could add up and put a heck of a dent in your savings.

    So if you’re wondering if leasing or buying a car is right for you, here are 10 reasons not to lease a car, based on our personal experience with the additional costs and fees paid when leasing.

    happy woman sitting in car holding keys. Text reads 10 reasons not to lease a car & buy instead.

    How Leasing a Car Works

    Before we hop into the thick of it, let’s talk about how leasing a car works. It’s similar to renting an apartment – you put down a deposit, make monthly payments, live there for a year, and then, in the end, you move out and are back at square one with finding housing.

    Leasing a vehicle is the same: you put down a deposit, make monthly payments, and at the end of the lease, you return the car and, you guessed it, are back at square one with no vehicle.

    Financing a Lease

    Lease financing is different than when you purchase a vehicle outright. When purchasing, you’ll get pre-approved for an auto loan before you go shopping (or once deciding), and you will make payments on the loan every month.

    Leases are financed through a financing company. They purchase the cars from dealers and then lease them out to you. The leasing company sets the lease terms, including the downpayment, monthly payment, lease length, and mileage allowed.

    Leases can last anywhere from two years up to six, depending on what terms are agreed to by both parties. Often, if you opt for a longer lease, you’ll be required to have more of a downpayment. 

    Leasing is another form of financing, but you don’t end up with a vehicle at the end of the process. Plus, there are a ton of other restrictions, rules, and fees that play into leasing. Let’s talk about the top 10 reasons not to lease a car:

    1. You can’t customize your car when you lease.

    If you’re big on having a fancy car that lets everyone know who’s coming around the corner, you can forget it. No bumper stickers, significant changes, modifications, or even window tinting is allowed. If it can’t be removed (like your favorite fuzzy dice from the rearview), you can’t do it without tacking on massive penalties when you turn the vehicle in.

    2. You pay all maintenance costs.

    Sure, you’d do this anyway with your regular car. However, leasing companies expect normal wear and tear, but expect the car returned in good condition. Anything beyond that will be penalized. Suppose you choose to avoid following the basic maintenance schedule. In that case, the financing company could consider this a breach of your lease contract, which means being subject to additional penalties and fees at the end of your lease.

    Because you generally lease a new vehicle, it has a warranty. Like owning your car, the dealership will only cover these repairs when the warranty covers the issue. 

    Rarely leasing companies offer maintenance coverage, but – guess what? – it’s for an additional fee. 

    3. You’ll pay more in the long run, even without all the extra leasing fees.

    Sure, you’ll have lower monthly payments with a lease, which is excellent. However, you’ll pay more interest because of how lease financing works. 

    Leases have a higher interest rate, which means you’ll pay less toward the loan principle. What does that mean? Well, if you decide to buy the car at the end of the lease, it’ll cost you more than if you went out and bought a used car on your own. 

    For example, when my husband went to turn in his lease, they offered to let him buy it for $23,000. When we looked around, the exact vehicle with similar mileage was $2,000 to $3,000 less! 

    If we’d just bought a used one outright three years prior, we’d have:

    • Gotten a lower interest rate and therefore paid less in interest
    • All of the monthly payments would have gone towards the principle of the car loan ($350 x 36 months = $12,600)
    • The same car with the same mileage would be $2,000 – $3,000 cheaper, pricewise
    • We would have avoided so many extra fees (which I’ll cover next)
    • We would have had more affordable auto insurance

    4. Your lease agreement is still in place after an accident, even if your car is totaled.

    My husband was using his lease to do deliveries – which was probably not allowed to begin with. However, late one night, he hit a deer and totaled the front end of his truck.

    Two guesses who paid for the front end to get revamped entirely? We did! Not only did we have to pay the deductible, but we also had to fight with the insurance company to cover the repairs fully. Plus, the cost of insurance went up after everything settled.

    Now, imagine if his car had been totaled. Who’d be responsible for that? Again, we would have. We would have had to go through all that and hope that the check that the insurance cut us would be enough to cover the cost of the car from the leasing company.

    And if it didn’t? We’d have to pay the difference because you’re on the hook for the entire lease. You’d better cross your fingers and hope your insurance covers everything or that you have a heck of an emergency fund.

    One bit that can help is gap insurance, which is a good idea for a car that’s being financed anyway. 

    5. Breaking a lease is expensive.

    What happens if you lose your income or face other problems preventing you from paying your monthly lease?

    If you miss payments, your credit score gets hit, and the car is repossessed. Then, you’ll get hit with a hefty fee for early termination of your contract on the lease.

    And even more painful, the leasing company will make you pay the rest of the lease, as you agreed when you signed the contract. They do not care what happens in your personal life and will not negotiate on what’s owed. They will expect you to pay the balance, and they expect it now. 

    6. Auto insurance and (possibly) registration fees cost more for a leased car.

    As if the fees weren’t enough, you must also pay more for auto insurance. Leasing companies and dealers are allowed to dictate how much insurance coverage you have. You must keep it at that standard, which will cost more than the average consumer usually chooses to insure their vehicle. 

    While it varies, some states charge more registration fees for leased vehicles. Plus, they can choose to charge sales tax on the following, according to

    • Amount of the down payment
    • Total of the monthly lease payments
    • Entire value of the vehicle
    • Taxes added to monthly payments
    • Lump-sum tax payment due at signing
    • County, city tax for your specific jurisdiction

    7. You’ll pay even more if you exceed your lease’s mileage limit.

    Leases typically allow anywhere between 7500 to 12,000 miles per year on the vehicle. If you go over, you’ll pay anywhere between 15 cents to 30 cents per mile. It doesn’t sound like much, right?

    Remember how my husband was using his vehicle for deliveries? He went over his mileage and had to pay over $400 in extra mileage fees. Spending that additional cost for a car you aren’t even keeping is painful. That’s a few nights in a nice hotel or a good chunk of a downpayment toward a new vehicle. Ouch. 

    8. You’ll pay a ton of extra fees.

    The fees are one of my biggest problems with leasing a car. The expenses that can get tacked on to your lease are unbelievable – and sometimes without you even realizing it. The true cost of leasing a car is pretty eye-opening:

    When you sign the lease, you pay the following:

    • Downpayment
    • Monthly payment
    • Gap coverage
    • Higher interest
    • Higher insurance
    • Higher registration fees (depending on your state)
    • Sales tax
    • Administration fee

    If you return the vehicle after the lease is up, you pay:

    • Extra mileage fee (15 to 30 cents PER mile)
    • Cleaning fees
    • Repair for any excess wear and tear
    • Additional costs if you choose to modify or customize the vehicle
    • Additional fees if you didn’t follow the basic maintenance schedule
    • Lease disposition fee (yes, they charge you for the lease ending)

    If you choose to purchase the vehicle after the lease is up:

    • Acquisition fee (yup, you must pay a fee to buy it!)
    • The total cost of the car (that is rarely negotiable)

    If you choose to end the lease early:

    • An early termination fee
    • Plus, you’ll have to pay for the rest of your lease because they will not let you out of it. 

    Just looking at this list makes it pretty clear why leasing a car is not worth it. Always check the fine print when signing anything, including a lease!

    9. None of your payments go toward owning anything.

    Your two-year lease is up, and you’ve been good at keeping up with your monthly payments. After all your fees are paid and you’ve turned in your vehicle, you get…nothing. There is no money towards a new car or an old vehicle to use a trade-in for a new car. 

    When you own your car, you have that asset for a new one. Whether you trade it in or sell it on your own, you’ll have equity (or money) to put toward your next vehicle in the long term. 

    With leasing, you don’t have anything at the end of the term and are starting over from scratch, which makes it one of the major disadvantages to leasing a car.

    9. You’ll have a monthly payment for the rest of your life.

    If you’re like me, there is nothing like the feeling of paying off debt. Making that last payment is so, so sweet – and is such a reward for all your hard work. Your car (or house, or braces) are all yours.

    You’ll always have a monthly payment when you hop from lease to lease. Having to make a car payment every month for the rest of your life is not my idea of fun. That money could be spent on vacations, schooling, home improvements, or saving up for your next hot rod. 

    Car Leasing Pros and Cons

    Now that we know the top 10 reasons not to lease a car, we should still talk about the pros and cons of leasing. 

    Pros of leasing a car:

    • You’ll get a new car every 2 – 6 years
    • Less chance of random breakdowns, unlike with older cars
    • Business owners can lease a car for business and write off the mileage and expenses (only if you itemize your expenses and track mileage)

    Cons of leasing a car:

    • Limitations on personal use; most leases won’t let you do commercial work
    • You don’t build any equity or net worth from leasing
    • You don’t own it, and you have nothing to trade in at the end
    • You can’t use the car as collateral for other purchases if you need to
    • If you don’t like the car, you’re stuck with it until the lease is up
    • Holy additional fees, Batman! You’re charged a fee for just about everything
    • It costs more than owning a car outright – higher insurance, fees, registration, and more. 
    • You have to stay up on maintenance
    • Plus, the 10 reasons not to lease a car listed above!

    While there are not more problems with leasing a car, there are definitely more costs associated. You must be meticulous with your records and pay attention to the details. If not, it will pay dearly in fees and extra work, making it a waste of money to lease a car.

    Additional Questions

    What if you’re already in a lease?

    I’ve been there, and I feel your pain. First, ensure you are keeping up on monthly cost and maintenance and keeping track of your mileage. Do everything you can to toe the line in those respects to lower any potential future fees.

    You do have the option to pay the lease period off early. However, that will result in an early termination fee and the final cost being due immediately. This could be your option if you can afford it, and it makes sense.

    Secondly, if you are struggling with your lease and need out for any reason, some companies can help you find the best way to end the lease. While I’ve never personally tried them, these seem like the best option:

    • A company that helps you with lease transfers and marketing your car to potential lease buyers.
    • An online marketplace to buy or sell a lease that’s been running for twenty years. 
    • This site helps you to buy out your existing lease or find a similar car based on a monthly payment that fits your budget.

    How much is a lease on a $45,000 car?

    Many factors go into this, including the vehicle price, down payment, residual value, sales tax, interest rate, and lease term. US News has a great monthly lease calculator that you can use to play around with the variables.

    Is it a bad time to lease a car?

    Only you can judge if it’s a bad time to lease a car. You need to look at your finances, credit score, and if you can make the monthly payment. Knowing all the fees that go into it, I’d say any time is a bad time to lease a car, but that’s ultimately up to you!

    Now that you know the top 10 reasons not to lease a car, learn how Wheelzy can be the right way to sell your car.

    Text that reads welcome to Debt Free Forties

    A forty-ish web designer/developer by day, a budget & financial fanatic by night. I’m a mom, wife, avid reader, and DIY enthusiast who’s tracking our journey to debt freedom. Read More

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