Let’s look at a few examples. Back in April 2020, a BMW X1 crossover SUV was leasing at an advertised offer at $299 a month for 36 months with $4,999 due at signing; last month a 2023 model was being offered for $569 per month for 36 months with $5,099 due at signing. A Lincoln Corsair SUV that went for $373 a month for 39 months with $3,694 down in 2020 was up to $433 per month for 48 months with $4,211 due at signing in January 2023.
While opting for a seven year term to borrow $25,000 at 5.09% can save a new-car buyer around $277 per month versus taking out five-year financing at the same rate, Experian says this will cost nearly $1,401 more in interest over the life of the loan. And then there’s negative equity to worry about as the amount owed exceeds the depreciating car’s value down the road.
According to TransUnion, of 3.8 million consumers who faced an ending vehicle lease between July 2021 and June 2022, only 25% elected to lease another model, which represents a 40% drop since January 2020. Even more telling of shifting sentiment in the marketplace, around 26% of lessees elected to terminate their contracts six or more months prior to the stated lease-end date —that’s up by 63% since 2019.
Leasing is not for everyone, however, especially those who log a great number of miles and/or who treat their rides roughly. New-car leases come with strict mileage allotments, which are usually 30,000-36,000 miles for a three-year term. Those exceeding the limit will face penalties of $0.15-$0.25 per mile, which can add up quickly. What’s more, leased vehicles must be returned in pristine condition, otherwise the lessee will be charged costly “wear and tear” fees.