Should I Lease my First Car?
Many people who are looking for an economical way to drive a new car, perhaps their first car, will look at leasing as a possible solution.
The consideration of leasing is often based on a mistaken belief that leasing is like renting and doesn’t require good credit as does buying with a loan. It isn’t renting and it does require good credit.
But is leasing a car a good solution for first-time car buyers?
The answer is — it depends.
If the first-time buyer is a teenager, less than 18 years old, leasing is not an answer.
Since leasing is a form of financing, similar to a loan, it requires that the customer be of legal age and have a good credit history. Furthermore, even if the teen’s parent leases a car to be driven by the teen, it’s still not a good idea.
A teen may not be able to stick with the requirements of a lease — an annual mileage limit of 10,000-12,000 miles, no customization of the vehicle, and minimal wear-and-tear. Insurance may be more expensive than anticipated due to the higher coverage requirements of a lease.
If the customer is 18 years or older, leasing might be a solution, although it is necessary to have a good income and an established credit history with a good credit score.
Since many young people haven’t had credit cards or previous loan accounts, it can be difficult or impossible to be approved for a car lease.
One possible solution is to get a co-signer, someone with a good income and good credit to sign with the young person on the lease. A co-signer doesn’t actually participate in the lease unless the primary signer fails to pay.
Of course, if the buyer is of legal age and has good credit, leasing might be a good solution for a first car — or not.
A lease offers low monthly payments, as much as 30%-60% lower than loan payments for the same car. It saves sales tax money in most states. It eliminates the hassles of selling or trading a used car when it’s time to move up to a newer car.
Leasing works well for thousands of people but most of those people understand how leasing works and are comfortable with its tadeoffs.
For anyone leasing for the first time, they should understand that car leasing is a bit more complicated than buying with a loan, which makes it easier to make mistakes.
Therefore, we recommend that those who are considering leasing their first car take the time to visit our sister site, LeaseGuide.com, to learn how leasing works and how to determine if it’s right for them.