If you're in the market for a car, you may be weighing your options between buying and leasing a new or used car.
Depending on your circumstances, you may also want to consider assuming someone else's car lease. Lessees may decide they want to end the lease early because they no longer like the car, they can't afford the payments or they experience a life change such as an addition to the family, says Philip Reed, senior consumer advice editor for
This quick consumer guide is for a closed-end lease, the most common type of vehicle lease.
"You cannot duplicate a short-term lease like that with a leasing company."Reed says assuming a lease is an option for a consumer who doesn't want to a buy a car.
"Someone who has a temporary assignment for 18 months to two years may not want to buy a car, so a lease assumption can be a good compromise," he says.
However, you can negotiate to have the seller pay these fees.
Low car payments and the flexibility of a short-term lease may be tempting, but before you assume a lease, you need to be aware of the potential pitfalls."Most leases are limited to 12,000 miles per year and charge a fee of 15 cents for every mile over the limit when you return the car," Reed says.
If you end your lease early, you may have to pay substantial early termination charges.
At the end of the lease, if you don't buy the vehicle, you may have to pay a disposition fee and charges for excess miles and excessive wear.
You will likely have to pay charges for exceeding those limits if you return the vehicle.
At the beginning of the lease, you may have to pay your first monthly payment; a refundable security deposit or your last monthly payment; other fees for licenses, registration, and title; a capitalized cost reduction (like a down payment); an acquisition fee (also called a processing or assignment fee); freight or destination charges; and state or local taxes.
Leasing: Monthly lease payments are usually lower than monthly loan payments because you are paying only for the vehicle's depreciation during the lease term, plus rent charges (like interest), taxes, and fees.
Buying: Monthly loan payments are usually higher than monthly lease payments because you are paying for the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.
Leasing: Most leases limit the number of miles you may drive (often 12,000-15,000 per year).