Should You Buy Your Leased Car? | The Budget Mom (2024)

FAQs

Is it smart to buy a car that you have leased? ›

Only go ahead if you are getting a great deal on both the lease and the payoff amount. If it would be cheaper to buy your car upfront, or if you think you'll want the car for a long time, skip the lease. Just buy a car directly instead.

In the short term, it's generally cheaper to lease a car due to less stringent down payment requirements, lower monthly payments and minimal maintenance and repair costs. In the long run, however, you may be able to save more by buying a car because you'll retain all the equity you build as you pay down the loan.

A general rule of thumb is no more than 20% of your take home pay.

Pros of Leasing a Car

Lower upfront and monthly costs: Leases often require a low or no down payment, and monthly payments are typically lower compared to auto loans. You can also expect repair costs to be lower, so you don't have to set aside as much money to anticipate those.

When your leased car's trade-in value is greater than the residual price you'd have to pay to buy it at lease end, you have equity. Equity at the end of a car lease could help you cash out or get a good deal on purchasing your current vehicle, or buying or leasing a new one.

As mentioned earlier, your leased car's buyout price includes its residual value and all other payments, taxes and fees required to transfer its ownership to you.

In 2024, lease returns are expected to rise then fall. Experian predicts, “retail leasing returns will rise to 1.1 million in the second quarter of 2024, but then fall to only 640,000 by the end of that year.” So, if you're hoping to buy a pre-owned car in 2024, look around April to early summer for the best selection.

In 2024, whether to buy or lease a car depends on your individual needs and lifestyle. With manufacturers pushing more attractive lease deals, leasing may become a more appealing option for many. Leasing is a great way to avoid the worst effects of today's high interest rates.

on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000. And at 150 k salary, that means your max car price should be 50 2500.

How much should I spend on a car if I make $60,000? ›

How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.

How many miles per year is good for a lease? Most dealerships and leasing companies advertise between 10,000 and 15,000 miles annually. However, some companies offer high-mileage leases with upwards of 30,000 annual miles. You'll pay less for a short-term car lease with a lower annual mileage limit.

Just make sure to stay on top of your payments. Lease payments are reported to the major credit bureaus the same way finance payments are. On-time bill payments are one of the strongest factors influencing your credit score, so keeping up with your lease payments should have a positive effect.

Advantages of leasing include lower monthly payments, no long-term commitments, and minimal maintenance costs. Disadvantages include never owning the car, charges for damage or exceeding mileage limits, and restrictive terms and conditions.

You're a Low-Mileage Driver

If you typically log between 10,000 and 15,000 miles per year, leasing a car might make more sense than purchasing one. Just be aware that if you exceed the mileage listed in your contract, you could be charged a hefty fine at the end of your term.

In other words, a vehicle lease agreement can help you build credit in the same way an auto loan can. As long as your dealer or leasing company reports to all three credit bureaus—Experian, TransUnion and Equifax—and all your payments are made on time, an auto lease can certainly help to build your credit history.

The lease payoff amount is the total sum to pay if you want to buy the car before the lease contract expires. This includes its buyout price and the equivalent of the remaining payments due until the leasing period expires, plus a car purchase fee in some cases.

You may see a Buyout Amount or Payoff Amount listed in your monthly leasing statement. This buyout amount includes the residual value of your vehicle at the start of the lease, the total remaining payments, and possibly a car purchase fee (depending on the leasing company).