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How the leasing market is changing Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators as well as publishing unique and objective content by allowing you to conduct your own research and compare data for free – so that you can make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site are from companies that compensate us. This compensation may impact how and when products are featured on this site, including such things as the sequence in which they be listed within the categories of listing, except where prohibited by law for our mortgage, home equity and other home loan products. But this compensation does have no impact on the content we publish or the reviews that appear on this website. We do not cover the vast array of companies or financial offerings that could be accessible to you.

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3 minutes read. Published on December 08, 2022.

Writen by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of using loans to buy an automobile.

The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances with concise, well-studied and well-organized data that breaks complicated topics into bite-sized pieces.

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At Bankrate we are committed to helping you make better financial choices. While we are committed to strict ethical standards ,

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Many drivers choose to for the option of changing their car more frequently and also avoid a significant financial commitment. But while leasing is a very popular option, there’s been a decrease in availability. In the peak, nearly 30% of sales were leased vehicles between 2015 and 2019. The percentage of leases is close to that the level of Cox Automotive. This drop should be a wake-up call to those in the market, as it could cost more. Why is leasing for vehicles declining? Leasing has seen a drop due to three reasons, all of which were triggered in part by the supply chain and pandemic issues that followed. 1. Leasing has become too expensive A very attractive advantages of leasing is the that it offers the same benefits as buying the exact same vehicle. In general, leasing is cheaper because you pay for the vehicle depreciation incurred over the length of the lease, as well as the tax and rental costs -as well as possibly some . In addition, leasing historically carries a lower upfront cost compared to buying. In the second quarter of 2022 for instance, renting an Honda CR-V cost to lease than buy according to Experian. But as vehicle prices have gone up so has leasing no longer a less expensive monthly cost. Last year, motorists were paying the same amount for leasing an automobile as they did on a brand new car loan in 2020, according to Cox Automotive. For many, this expensive cost is a detriment to the main purpose of leasing and renders it out of the equation. 2. An increase in lease buyouts With fewer vehicles on the market and more expensive, many are holding onto their cars they lease instead of signing a contract for an entirely new vehicle. This process is known as a . By keeping ownership of the vehicle, consumers could avoid the lease market and the higher vehicle prices for purchasing. As more and more drivers sign off on lease buyouts, to the leasing industry. This interference in the leasing process increases the shortage of vehicles. 3. Less leasing incentives, which means less vehicles on the market, dealerships must make back any money lost in other ways. One method is by removing any that would have previously been present. This is particularly relevant to leasing cars. This means that with more expensive costs and less incentives to help sweeten the deal, leasing loses much of its appeal. The cost of buying used could be more expensive The shift in the leasing market will have ripple effects on cars and vehicles. If more people hold on to their lease cars which limits the market for used cars to a certain extent. Leased cars that don’t get recirculated to be leased again usually end in the market for used cars. Because there are fewer of them coming back into the loop so there’ll be fewer used cars available to buy. If you are like many drivers do not have the privilege of waiting to purchase then think about . It is worth the extra effort to get preapproved or will help you save money in the longer term. Should you lease or buy in 2023? The decision of whether to purchase or lease is based on your personal preferences and needs. You should consider the pros and cons of leasing or buying your next car. The leasing

Purchase

Cost

Leasing tends to carry lower monthly payments and lower initial deposits.

It’s possible to have to pay more initially and spend more each month.

Ownership

You will not be fully possessed of the vehicle unless you follow up with a lease buyout.

Once your loan is paid back, you own the vehicle in full the vehicle.

Restrictions

You will have restrictions on the number of miles you drive throughout ownership, generally between 10,000 and 15,000 miles.

There aren’t any restrictions on the vehicle’s mileage or other limitations regarding driving.

Additional charges

Based on the lease you may have to pay “wear and tear” charges based on the general maintenance of your vehicle.

The owner is responsible for any maintenance expenses that arise during ownership.

Each option has its own set of benefits and drawbacks. Regardless of which you choose be prepared to pay more over the next year. This is especially true when leasing, since it, unlike in the past, can cost close to the monthly cost of purchasing an automobile.

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Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of borrowing money to purchase a car.

Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping their readers feel confident to manage their finances through providing clear, well-researched information that break down complex topics into digestible chunks.

Auto loans editor

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