Car Lease

Facts and Myths When Leasing a Car!

What are some of the facts and misconceptions when it comes to leasing a car? There is much confusion among consumers, dealers, and even some so called experts when it comes to leasing a car. I will address some of that confusion here.

I drive to many miles to lease.
This may or may not be an accurate statement. In most cases the more miles you drive - the more reason to lease. For every mile you put on your vehicle the less it's worth. When you buy a car and not lease you end up with a car that has depreciated a great deal because of the excess miles. Now you have negative equity that you have to carry to your new car loan because you don't have a choice if you're trading before it's paid for. When you lease, the smart thing to do is build the excess miles in upfront. This will make your payment higher but, generally it will cost less than paying for that depreciation at the end. Most lenders will allow you to build into the lease up to 100,000 miles over the lease term.

I won't own it at the end.
This is a true statement. The question is, why would you want to own it? Even if you didn't drive your car it would be worth less tomorrow than it is today. A new or used car is a depreciating asset and not an investment. I would sooner pay for the use of the car (the depreciation) and return it to the lender at the end. They take the loss if there is negative equity not you.

It will cost me more to lease.
This is an unknown. You need to look at the total cost of ownership. I have to believe and in my experience it is generally less expensive to lease a car than buy. The biggest reason for this is that you don't have to deal with negative equity, the lender does.

A friend really got ripped off in a lease.
This is a very subjective statement. There are too many variables and unknowns to put this into perspective. Generally this statement comes from someone using it to blame someone or something else for their mistakes. You would really need to understand the whole story from both the borrowers and the lenders side. This statement usually comes from someone who drove their vehicle without regard to the miles they contracted for or they abused the vehicle and was charged for damages.

I can't trade early if I want to.
This is not a true statement. I am not aware of any lease that you couldn't trade out of any time you wanted. Remember though that by trading early you may have to pay unpaid sales tax and you will owe the full balance of the lease. Generally you will have much more negative equity if you trade your leased car early because you most likely have been making a lower payment all along. (one of the advantages of a lease is that you typically have a lower payment than if you had bought your car)

I will owe too much at the end if I want to keep it.
This is in most cases true. Again I have to ask, why would you want to keep it. This is one of the reasons to lease in the first place, so you can drive a newer car more often and not need to worry about what it's worth and what you owe. The exception to this would be if you really are the person that will drive the car forever and ever.

I can't accessorize my car if I lease.
This is not true. Most lenders will allow you to accessorize your leased car as long as you leave the accessories on when you turn the car in. Obviously you could remove any accessories that do not reduce the value of the vehicle or leave damage when removed.

I have bad credit; no bank will let me lease a car.
This depends on each individual and each different lender. Some lenders specialize in leasing to consumers with less than perfect credit. In other cases it may work out that the terms the lenders offer if you try to buy are not nearly as good as if you lease. Leasing a car can be a great way to reestablish your credit. If you have less than perfect credit always ask about the programs that the lender offers. It may be to your benefit to consider leasing a car.

Summary
There is not nearly enough room here to go into all the details of leasing a car. All I can say is keep an open mind, leasing is not such a bad deal as many people would want you to believe. In the end it's a matter of personal choice. I choose to lease.