car finance

10 Reasons Not to Lease a Car

Few things are more freeing (and necessary) than having access to a reliable vehicle. But buying a vehicle can be tough. While the costs of buying a new car remain high, many continue to turn to the idea that leasing a car is easier. However, there is still so much to consider before committing to a multi-year lease: Do you need a sedan or an SUV? Further, do you need a compact like a Mazda CX-5 or something roomier, like a seven-seater Mitsubishi Outlander? Will the SUV be big enough for everyone to ride comfortably in if your in-laws make a surprise visit? Will it guzzle so much gas that it’ll cost you a fortune to take a weekend road trip? And, of course, can you confidently commit to the monthly payments for twenty-four or thirty-six months?  

Whew…just thinking about all that is stressful. 

Buying can feel scary and permanent, which is why many choose a lease’s apparent flexibility instead. Unfortunately, leasing isn’t that simple, either. Read on to learn why.  
1. You have to negotiate 

If you’ve never leased a vehicle before, you may think it’s a clear-cut process. But far from it. Before worrying about the constraints of driving a leased vehicle (we’ll get to that), you’re forced to sit down with the salesperson at your dealership to hash out the terms of your lease. While signing up for Flexcar is straightforward and has no hidden fees, leasing a vehicle is like haggling with a street vendor over the price of a tchotchke–if that tchotchke costs thousands of dollars.  

Before getting into the nitty gritty of negotiating the finer points of the lease, you’ve got to decide how much you want to pay per month, which is contingent not only on how much you agree the car is worth (also known sometimes as “capitalized cost”) but also on how long you want to be locked into your lease. Not to mention the fees other than the monthly payments that are included in terms of the lease.  

2.  Notoriously pointless and hidden fees 

Acquisition fees, otherwise known as bank or administrative fees, are like the leasing equivalent of realtor fees. Typically, between $400 and $900, these fees are paid to the leasing company that arranges the lease itself and are either included in the monthly lease fee or paid upfront in sum at the time of purchase. Few things feel worse than paying someone to let you pay them for something.  

Disposition fees, however, are paid after a lease. This is the fee you’re paying to the leasing company to cover the cleaning of your vehicle once it is returned to them. It also covers the cost of selling your vehicle, which seems overkill, given that they already made money from your lease and are poised to make even more from selling your car to someone else. This fee can sometimes be avoided by purchasing your car at the end of your lease (we’ll get to that, too!) or, if you’re lucky, by leasing another vehicle of the same brand from the same dealership. And that brings us to the Money Factor.  
3. Money factor: Is that a new game show?  

Unfortunately, no. The Money Factor is a kind of interest built into the loan payment on your vehicle. To explain it all in-depth would require a PowerPoint presentation and a degree in finance. Simply put, the Money Factor can be determined by either a simple annual percentage rate stacked on top of the total cost of your vehicle or by working through a mysterious formula that considers the cost of your vehicle, the length of the lease and your credit rating. Unlike a long-term rental such as Flexcar, your financial history could determine what you will pay for your leased car. That’s not great, especially considering all the other costs associated with owning a car, such as… 

4. Insurance coverage 

Yes, insurance. Insurance is unsurprisingly not included in most, if any, leases and is legally required for anyone driving in the U.S., Depending on where you live. Insurance can cost upwards of $150 per month. What’s worse is that some leases require that you pay for higher liability limits, which may increase your premiums. That plus several hundred more for the lease itself? Not cheap. Flexcar’s vehicle fees include insurance coverage for each of our members. Plus, you don’t have to worry about gap insurance.  

5. Gap Insurance  
This is not insurance that specifically covers vehicles that have encountered massive potholes, but rather an additional type of insurance that covers (bear with us) the difference in the market value of the car at the time of any accident and the total price that you agreed to pay for your vehicle. This insurance is necessary as a condition of most leases because all vehicles—financed or leased—depreciate immediately after being driven off the lot. If you total your vehicle, your standard auto insurance will cover the cost of the car at its current market rate. But, if you initially agreed to pay off a lease equivalent to $22,000, and your Kia Soul has a market value of only $17,000 when it’s totaled, that means that, without gap insurance, you’d be left owing your dealership $5,000. It’s messy, complicated, and almost as unpleasant as having your car regularly serviced at a dealer.  

6. Maintenance worries 

Perhaps one of the most dreaded aspects of vehicle ownership is paying to keep that vehicle running. What’s worse is finding a dependable mechanic to keep your vehicle running at a fair price. With Flexcar, we’ll either foot the maintenance cost, or you can swap your vehicle for a new one free of charge! You don’t have that option with leasing, though: Most leases, if not all, require that any mechanical work on your vehicle be done by the dealership’s mechanics, who are not exactly known for quoting the lowest prices in the business. Most leases are so specific about how their vehicles are maintained that they won’t even allow you to change your vehicle’s oil. Not to mention making repairs to normal wear and tear.  

7. Wear and tear  

Have a furry friend that you want to bring on a road trip? I better hope Fido doesn’t take a bite out of your leather seats or, perhaps worse, get carsick all over them. Even minor cosmetic damage can result in major fines if discovered upon the return of the vehicle at the end of your lease. For better or worse, many of us treat our vehicles as second homes, and it’s not very relaxing having to be constantly mindful of the smallest amount of damage that is being done to your home. Also, not relaxing? Having to keep a watchful eye over your vehicle’s odometer, lest you be charged for every mile driven.    

8. Mileage allowance 

Even when paying several hundred dollars per month and abiding by your dealership’s strict maintenance requirements, you could still be on the hook for extra charges just for… driving your car too much. Leases typically come with mileage allowances of around 12,000 per year. Any miles driven beyond that allowance will cost you 20 to 30 cents per mile. With a few thousand extra miles driven over a two or 3-year lease, you could pay thousands of dollars in fines when you return your vehicle. With Flexcar, you can drive your vehicle for as many miles as your heart desires.  

9. Lease termination fees 

Are you moving to a different country? Lost your job and can’t afford payments? If you’re leasing a vehicle, you’re out of luck: You’ll have to pay to get out of that contract, and, depending on what was negotiated way back before you even got the car, that could be a hefty amount. Not just an early termination fee—like most things lease-related, involves complicated calculations—but also extraneous things like a vehicle disposal or transfer fee. If you had any parking tickets or past-due lease payments, you’re still on the hook for those, too.   

This is where Flexcar’s namesake—our Flexibility—really shines. There are no long-term contracts and no fees for returning your car. You can even swap into a different vehicle at no high cost. You can’t buy your Flexcar vehicle, but purchasing the car you’ve been leasing is not advisable.  

10. Want the car you’ve been leasing for years? You’ll pay even more!  

Buying your car at the end of the lease does have some upsides: if you’re not returning the vehicle, you do not have to pay for excess mileage fees or those wear and tear costs. However, if your vehicle in its current condition is appraised at less than you predicted at the start of your lease, you could be paying several thousand dollars above market value to keep the car you’ve been driving for years. So, after paying thousands of dollars to your dealer, your options are to pay way too much money for your car or end up with no car at all. Of course, you can always try to roll your terms into a new lease agreement with your dealer, but then you’d be back at square one: negotiating.  

Try out the best alternative to leasing and buying. 

Flexcar is a car subscription service that provides all the freedom of having a car without any of the hassles that come with leasing… or buying. 

Select from a wide variety of vehicles for a low weekly rate plus mileage. There are no long-term commitments or big down payments. Pay only for the miles you drive, so there’s no worrying about paying overage fees or depreciation fees.  See how it works, and get ready to own the road, not the car!