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5 Reasons it’s Not Worth it to Lease a Luxury Car

If you’re in the market for a luxury car, then you probably have thought about leasing since the monthly payments will be much more affordable. Why lease a Honda Civic when you can lease a BMW 3 Series for about $100 more per month? Of course, the math makes sense, but there’s a lot more to consider than just your monthly payment. Here are five reasons that it might actually not be worth it to lease a luxury car.

The mileage allotment

Every lease has a mileage allotment attached to it, meaning you can only drive a certain amount of miles per year while you have the car. For most leases, the mileage allotments are typically 7,500, 10,000, 12,000, or 15,000 miles per year, but what if you don’t drive that much or you drive more than 15,000 miles per year? In the former case, you would actually be paying for more than you need and you’ll never see that money again, so it’s not worth it. And in the latter case, if you drive more than 15,000 miles per year, then you’re better off financing the car, or better yet, buying a two-year-old, certified pre-owned luxury car.

2020 BMW 750Li rear | BMW

There might not be any special incentives

Most higher-end luxury car models (Range Rovers, some high-end Audis, and BMWs, etc.) don’t have any special incentives from the manufacturer, which means that you might end up paying more than you would if you financed the car. Without these incentives, your monthly lease payment could actually end up being more than if you took out a regular loan for the car. In that case, we would recommend either putting a larger down payment and financing it or just finding a certified pre-owned car to get to that same lower monthly payment that you were hoping for.

Not worth buying after the lease

When you lease a luxury car, you do have the option to purchase it after the lease term is up. This option might look attractive because you would now be able to own the car that you’ve been driving for a few years and are completely familiar with it. However, considering most luxury cars depreciate very quickly, there’s a chance that the car might actually be worth less than it’s residual amount after the lease term is up, which means that it’s not even worth it to buy it out. In that case, financing it from the get-go could be a better idea.

RELATED: Why Do Dealerships Love When You Return Your Car Lease?

Cars stand on display for sale at a Mercedes-Benz dealership during the coronavirus crisis
Mercedes-Benz models available for lease at a dealership | Sean Gallup/Getty Images

Luxury cars depreciate quickly

When it comes to leasing, the higher the residual value of the car, the lower your monthly payment will be. For example, Audis lose around 50% of their value within the first three years, so if the residual value of that Q5 that you’re thinking about leasing is 50%, then your monthly payment would be much higher than if it were 62%. In this case, your monthly payment could end up being higher than if you financed the car, or financed a used one instead. Just remember to weigh your options and see what makes sense.

High money factors

Lastly, the money factor (interest rate) on most luxury cars is typically higher than other car leases like Hondas or Toyotas. This is due to the lack of incentives and subvented rates from the manufacturer, so in the end, leasing a luxury car could prove to be more expensive than it has to be.

RELATED: How to Get Out of a Car Lease Early

Salesperson showing vehicle to potential customer in dealership; Shutterstock ID 447213895; Purchase Order: -
Salesperson showing vehicle to potential customer in dealership | Shutterstock

Make sure to do the math

Don’t get us wrong, we’re not trying to say that leasing a luxury is bad and that you should only finance or buy a certified pre-owned car. But what we do advise to simply do the math and make that the lease that you want to get into makes sense for not only your budget now but in the long run as well.