Car Buyer Labs

Car Buying Advice, Tips, and Reviews

A couple is signing paperwork after discovering Chevy lease deals.

Buying a New Car? The Time Is Right to Consider Leasing Instead

Chevy lease deals are always abundant at the end of a model year, making the fall a great time to shop the Chevrolet new vehicle lineup. As the planet’s largest automotive conglomerate, General Motors – and by extension Chevrolet – are well-positioned to offer the industry’s most aggressive lease programs. If you haven’t leased before or have previously written off leasing, it might be time to take another look.

When you lease a vehicle, you essentially agree to a long-term rental. Since a typical lease lasts for 36 months, you’ll still feel like the vehicle’s owner. In a way, common lease restrictions, like mileage limits and wear-and-tear guidelines, are a contractual reflection of how we want to treat a car we own outright. In other words, they’re not really restrictions.

It’s difficult to pinpoint any glaring disadvantages to leasing since you’ll have a lower monthly payment than you would if you financed the car with a traditional loan. You probably won’t have to put as much money down, either. Also, you’re guaranteed to drive a new car every few years because the lease requires you to return the car when the lease term ends. A lease could be beneficial for you too.

A salesperson is showing a woman a vehicle.

Benefits of Leasing

Let’s face it: depreciation is the dirty word of new car buying. We all know that the second we leave the dealer’s lot, our new car loses a substantial chunk of its value. Given that universal truth, it leaves us wondering why anyone would finance or even pay cash for a brand new car. If you don’t want to pay the higher interest rate associated with financing a used car and you don’t have enough cash to buy one outright, you may be the perfect candidate for a lease.

Leasing almost always allows you to move up the trim range to a vehicle with more equipment and better performance ratings. Lease payments tend to come in lower than a traditional loan payment because you’re only financing a percentage of the car’s value. Specifically, you pay for the depreciation that takes place during the lease term. If the car retails for $30,000 and its residual value after three years and 45,000 miles is 45%, then your payment is based on $16,500, or the depreciated amount.

As a first-time lessor, you won’t recognize the third and possibly biggest benefit of leasing, which is that you’ve entered a cycle that entitles you to drive a brand new car every three years. Not much is likely to change on a vehicle model in three years, especially if your leased car is one that has recently undergone a redesign (e.g., it’s early in the generational life cycle). Also, the newest generation vehicles will have higher residual values, which means you’re financing less.

Leasing 101

How does leasing work? The lease process is similar to the financing process financially and similar to the car rental process procedurally. First, you select your new vehicle from the dealer’s inventory and agree on a price, just as if you were planning to buy it. Then, the dealer determines the vehicle’s residual value (what it’s worth at the end of the lease term), deducts the down payment, and calculates the capitalized cost, which is the official term for depreciation.

You are responsible for paying the total capitalized cost plus the money factor (the lease’s version of an interest rate), which the dealer will amortize into equal monthly payments for the term of the lease. Most leases run for three years, but it’s not uncommon to see shorter or longer terms, and there are a handful of fees, including sales tax, that might also be figured into the monthly payment.

Determining the vehicle’s residual value first requires you and the dealer to agree on a maximum annual mileage number. Most leases allow between 12,000 and 15,000 miles per year, and if you run over, you agree to pay a hefty per mile surcharge. If you’re a long-distance daily commuter, leasing may not be practical, but for more local drivers, the 15,000 annual mile cap is usually sufficient. As long as you don’t go over, your end-of-lease charges shouldn’t be substantial.

A salesperson is shaking hands with a shopper after discovering Chevy lease deals.

What Happens at the End of the Lease?

As you approach your lease termination date, you’ll start receiving correspondence from the manufacturer. It will outline your options, which include purchasing the leased vehicle outright for the residual value noted in your contract, returning the leased vehicle to your local dealer and walking away, or entering into a new lease of a different vehicle. Automakers typically want to know your plans ahead of time.

Deciding what to do is straightforward if the vehicle is worth close to its predetermined residual value, but if your specific make and model is in high demand, it’s possible for you to sell it, pay the manufacturer the residual value of the lease, and put the extra dollars left in your pocket. This is rarely the case, but it doesn’t hurt to check your car’s Blue Book value before you turn it in. Because your vehicle’s residual value is locked in contractually, it won’t ever go down (or up).

When you drop your vehicle at the dealership, it will be carefully inspected for any excess wear and tear, and the odometer will also be checked to confirm the mileage is at or below the contract limit. There is typically a small return fee to cover the dealer’s time and paperwork requirements. If everything checks out, you’re finished. It’s really that simple, and you get to shop for your next vehicle free and clear from any obligations.

Is Leasing Right for You?

We already mentioned the first pain point for would-be lessors: mileage. If you’re a frequent road tripper or someone who drives a considerable distance every day, it’s doubtful you’re a good candidate for leasing. Mileage restrictions are an important component of just about every lease, and while some manufacturers are willing to let lessors “buy” additional miles during the lease term, it’s the exception, not the rule.

Also, since you don’t officially own the car, the factory dictates how much insurance you need to carry. Expect to include collision and high dollar amount coverages for every portion of your auto insurance plan. You almost always end up paying more to insure a leased car than you do one you own or finance. If you don’t maintain an acceptable level of insurance coverage, the leasing company has the right to add the cost of a policy to your monthly payment.

Finally, you shouldn’t lease a car if you can’t take great care of it. Some examples of scenarios that aren’t conducive to leasing are urban buyers who park on the street, drivers who live in four-season climates but don’t have a garage, and households where there’s a good likelihood that young, inexperienced drivers (a.k.a. teenagers) might regularly get behind the wheel. Remember, you contractually agreed to keep wear-and-tear to a minimum.

The bottom line is when you lease a car; you’re just renting it from the manufacturer. Technically, they own it, which means you need to drive it responsibly and ensure it’s returned free from excessive damage. For some drivers, that’s not an easy proposition. Still, if your circumstances and driving habits align with the known restrictions, leasing may be a great alternative to traditional financing.