Leasing a new car is a popular alternative to purchasing one. In recent years, as many as 1 in 3 consumers have leased rather than bought their vehicles. When you lease a car, you're borrowing and repaying the difference between a car's value when it's new and when you turn it in, plus finance charges.

In general, the potential advantages of leasing a new car are:

• The monthly payment is usually less than a loan payment. That means you can lease a higher end car for the same monthly payment as buying a cheaper car.
• If you lease your car, you'll keep up with the latest technology, safety, and convenience features.
• The manufacturer's warranty will cover many problems you might have with the car. Some routine maintenance may also be covered.
• At the end of the lease, you might be able to buy the car for less than its market value.
• There are no trade-in hassles when the lease is finished; you simply drop off the car at the dealership.

• If you're a business owner, leasing a car might provide tax advantages.

   

The potential disadvantages of leasing are:

• The number of annual miles you drive will be limited. If you exceed the limit, the per-mile penalty could be stiff.
• At the end of the lease, you'll have to pay for any excess wear and tear on the car.
• Up-front costs on leases might include a first month's payment, a refundable security deposit, and a large acquisition fee.
• When you turn the car in, you have no equity in it, and if you continue to lease, you'll have to start the cycle all over again.
• If you decide you don't like the car, you're likely stuck with it until the lease expires—unless you opt to pay hefty termination fees.

Contact your insurance company

Provide your insurance company with the necessary information about any cars you're thinking about buying. Get a quote before you buy so you aren't unpleasantly surprised by the premium amount after the fact. When you do close the deal, your existing policy will probably cover you for a short period of time. But don't take any chances on a coverage gap—call your insurance rep right away. Looking for car insurance you can count on? Get a quote with AAA Insurance.

Establishing financing

Before you visit a dealer, arrange a preapproved loan with a trusted bank, credit union, or online lender. AAA also provides car buying services with competitive rates. Arranging a preapproved loan allows you to visit a dealership knowing how much you can borrow and what interest rate to expect, giving you a realistic budget and anticipate any obstacles you might encounter in the loan process. Perhaps most important, you can compare the loan's terms with a dealer's offer and use it as leverage to negotiate a better deal.

Bank on a fast, affordable auto loan with the AAA Auto Buying Program. AAA Members can save thousands off MSRP on new cars and find great deals on used vehicles. 

Car Buying