What is the point in leasing a vehicle?

Question

If you're going to put all that money into a car, why wouldn't you want to keep it?

I don't get it!

Answer 1

I sell cars, and I can tell you this, RARELY does someone trade in a car with a title. The average American trades their car in within 3 years of driving off the lot. The average American, at this time, is also trading in with an average $3000 net equity loser. Meaning, that on average, people are rolling over $3k worth of negative equity when they buy a new car. This is because nobody puts money down anymore, and this includes financing the taxes. So, take taxes and negative equity and then pay INTEREST on that, you can see where this is going.

Leasing is a way to break that cycle. However, there are many many pitfalls in leasing. They are EASILY avoided if you know what to look for and what you are doing, but so many people get suckered in by that lower payment, they don't pay attention to the details. and we all know, the devil's in the details.

If don't put money down, and you have to have a new car every 3 or 4 years, then leasing is by far the least expensive option for, no matter how many miles you drive. However, if you can afford to put 20% down, and finance for 48 months, then it may not be the best option. I can show you how leasing is the least expensive option, but that doesn't mean it's best for you.

There's an old adage in finance: Buy the things that appreciate, and lease the things that depriciate.

When done correctly, leasing a car is by far the best option. Just ask around, how many people do you know that do NOT have a car payment. Ask them, when the last time they didn't have a payment was. Betcha they can't remember.

Answer 2

Leasing makes no financial sense for most people. You are essentially renting a car for a long term. You come away empty handed after paying out hundreds of dollars / month for years. There are times when a business can benefit from a lease because of the tax deductions they are able to take, but these are not applicable to private owners.

If you determine that you can pay $250 / month, find a car that you can buy within that amount (don't tell the salesman you are looking for that payment, or you will get it for a car worth $150/mo). When you finish your payments, you will own the car. If you want a new one, your current one will provide your down payment.

You can always get more money for your used car by selling it privately, if you do your homework. No matter what price a dealer shows you for your trade in, he will never actually give you more than the wholesale value of your specific car. It is a numbers juggling game. Focus on the end price, how you get there doesn't matter.

Do the math both ways. How much does it cost you to lease a car for four years?
How much to buy it, minus the expected sale value of the car when you own it. You will find buying is better.

Answer 3

Here's the negative about leasing.

1) you always pay msrp. no price negotiation.

2) limited mileage (if you go over it costs a lot of money)

3) any non compliance with service schedules can cost you

4) since you start out at MSRP, it's almost impossible for them to sell the car for what you owe at the end of the lease and the difference is your responsibility (oh, and you don't get to keep the car).

5) There is a minimum deductible, so insurance is higher (if you're paying a loan, usually they require full coverage, but you determine how much deductible you can afford, not so with a lease).

6) This is the worst one. The dealer gets to determine whether the car has endured normal wear and tear, or excessive wear and tear, and it's your responsibility to absorb the cost when they can't sell it as good or excellent condition.

Answer 4

when you lease you get a new car in three years like most people, but you won't be upside down when you get another one like if you were to trade a vehicle you financed. with leasing you only pay for what you use, with financing you "pay" for the whole thing even if you don't use it all. leasing is good if you get tired of vehicles quickly. check out autoflexleasing.com and they will explain it better than i can

Answer 5

Leasing makes sense for people with Porsche tastes but a Pontiac budget - it's also great if you own your own business as you can expense the cost.

For the average consumer buying a used car or less expensive new car makes more financial sense.

Answer 6

Depreciation.

People lease because they can afford it and they get a new car every 2 years.

Answer 7

It is a way to get more car than you can afford and then in 2-5 years, you (in theory) just hand over the keys and get a new one. Never worry about repairs, etc because they are always under factory warranty.

Answer 8

in a lease, you only pay for the depreciation that occurs in your time with the vehicle(as figured in advance by the finance company)--so there are lower payments

Answer 9

I would advise against it. My girlfriend used to do that all the time and if you want out of it, you get screwed. All they tell you is the good parts. I never heard her say a good thing about it.