why do car dealerships push the lease program vs outright buying? there has to be a catch..?

Answer 1

Most of what the other people answering have said is more or less wrong. Leasing is great for some people bad for others, its all about the customer. If you like to have a relatively expensive 30k+ car every 3 years and you dont drive more than 12k miles a year then leasing is for you. If you keep you cars a long time then its not.
Example: I trade my cars in every 3 years and I like to drive a nice car so I lease a Cadillac CTS. Lease payment with 0$ out of pocket $345. If I had purchased this car my payments would have been around $600. So I get to drive it for 39 months at $345 a month and not worry about trading it in and being upside down on my car etc.. It works great for me. If I had purchased it and put no money down, financed my taxes license etc... I'd pay 600 a month and after 3 years might break even on the car but more likely owe more than its worth because I put no money down. Do the math, pay 345 a month or 600 for the same net result, gee, wonder what I will do.
Most people are too stupid to realize how great leases are because they dont uderstand them. The dealership does not collect a down payment unless the customer wants to put one down and in that case it would be called a capitalized cost reduction and go to reducing the monthly payments.
All these people saying the dealership makes more money are partly correct only because the dealership is guaranteed a portion of the finance income paid by the leasing company to the dealership. Most leases are done by manufacturer financing like GMAC or Lexus financial and the dealership has nothing to do with the car when it is turned in at the end of the lease. The car goes to auction or is sold to a dealership as a used car. Secondly, there is no guarantee that you will buy another car from the same dealership but the odds are better so the dealership does like leasing better as it increases their odds of selling you another car.
So it comes down to percieved value. You might think its a ripoff because you never own the car but who cares? A car is a depreciating asset that is worth less everyday and can depreciate quickly depending on market conditions. Save yourself the trouble of trading in a car every time you get a new one and lease one with no worries or buy one and keep it for 6 years to get the most value out of it. Its all in what you want to do. There are some great lease deals out there with no catches at all.

JR is wrong on all accounts. Stop by my dealership and see how it really works, no need to make up answers.

PS If you are honest with yourself about how many miles you drive a lease is great. The guy bitchin about over-mileage is way off. Only an idiot can't do some simple math to figure out if they drive 10, 12 or 30k miles a year. This is the stoopid part of people not understanding leasing. It does NOT work for everyone but just because an individual is upset becasue they were unable to accurately and honeslty guage the mileage they drive does not ruin leasing for everyone else. And guess who gets that money they pay when they go too many miles? NOT the dealership! The dealership isnt screwing you when you go 10k more miles than your lease allowed! You screwed yourself. Simple math, take the number on the odometer and divide by however many months youve had the car!!! LOL

Answer 2

There are several reasons for this, and usually the catch is from the customer, not the dealer.

One, it comes down to payments. Call your bank and get a payment price on a car. If it's an averaged price car today, let's say $25,000, then the price is going to be at least around $450 a month for 60 months...that's with around 6% interest, and considering good credit.

A lease can probably get you the same car, around $100 and maybe even a little more, less, and probably with a 36-48 month lease.

Now, when you consider that most Americans try, or want to try, trading their car before they ever pay it off...and get a title in their hands, then leasing is a better way to go. If you put the payment difference every month into an IRA, etc., and start doing that, at say 25 years old, look at what you'll have in your investments at age 65 and then you'll see the real value in leasing.

But, if you want to really keep a car for 10 years or more, or until the wheels fall off, then buying is the way to go.

Answer 3

These people are not right at all. my mother leased a car 6 years ago a honda civic, the lease was a 5 year lease, we went over the miles, there was at least 6 cigarette burns in the interior a dent in the hood a dent in the side, it was ramed into by a half ton truck in the other side and fixed it had the hubcap somewhat off because someone tried to wedge a crowbar into it and steal it im guessing, It had to be aligned at year 4 and my mother put diesel into it the first month she had it allmost ruining the engine luckily she wasn't going on a highway or it would of been done for, anyway.. when she returned it after her lease was up she was given the option to buy and she declined and bought a 2014 civic instead. With no credit or co-signer. She never was late on a payment the 5 years that she had it so they worked out a financing agreement that wasn't much more than what she was paying to lease the old one about 17 dollars more a month buying it. So maybe some places are strict with you going over your miles or ruining the appearance of the vehicle but some places are not.

Answer 4

Leasing:

That's renting, like an apartment. You don't own it when you finish out the lease. The dealership does. They can then turn around after you've spent 2 years paying the same price as you would on a loan and sell the car to someone else. And you still have to provide insurance for the car that you don't even own.

Outright Buying:

You pay for 1 to 2 years longer but the car belongs to you when it's done so you can sell it yourself and make money back.


You can see why the dealership pushes the leasing right?

--Lee Ann

Answer 5

They make more money. They sell the car to the leasing company for list price, and they know they will be selling another in 2-3 years when your lease is up. They can also sell a more expensive car, as lease payments are usually a little less than they would be on a purchase.

Answer 6

The catch is that they get you to give them a down payment and monthly payments. And they tie you into a set amount of miles you can put on the car. Say you get 10,000 miles a year for 2 years and you pay 250/mo for the car after a $1000 down. (Many of the low lease payments you see on TV hide the fact that you have to pay up to 3000 down, look at the fine print on that TV screen!) Now say after you had it for 2 years and you turn it in with 26,000 miles. The miles you went over at .20 per mile (this is a low ball estimate) add up to 1200 dollars added to the 1000 you put down so your at 2200 plus your payment of 250 by 24 mo is 6250 making it 8459 that you gave them. Now if there are any things wrong with the car they charge you for that. Dents, dings, rips, burns, and so on. But say everything is perfect and you turn it in and have paid out the 8459 to dive it for 2 years. They have the car back and you have nothing! They get to sell it again and make more money off it. I challenge anyone to take the total amount they have paid out for a lease car and add that number to the amount of the cars Kelly Blue Book value when they turn it in and see if they still think they are getting a deal. What you will see is just how much money the dealers are making off a lease. So in short leasing a car is like renting a house. It is the worst move you can make. You PAY forever and own NOTHING ever. Auto dealers love it. I have seen 100's of people that go over on miles or need a few things fixed, or both, and when their lease is up they owe thousands of dollars on the lease after having paid thousands in payments and then roll the problem into the next lease because they can not pay the balance and afford another car. (Look up Dave Ramsey online and see what he says about FLEASE cars.) You can buy a nice car for that same 8000 after 2 years, or make it 3 at the same 250/mo and you have 11,000 that you could have paid out on something you OWN. You do the math

Answer 7

Bigger profit margins, and in 2,3, or 4 years you'll probably be back to turn it in and get another one. Plus they are going to make some money on the service too.