There is so much confusion among consumers, dealers, and even some so called experts when it comes to leasing a car. I'll attempt to clear up some of that confusion here. You'll find many more answers and help with these and any other questions you might have about buying, leasing and financing a vehicle in my book, "The Insider's Secrets".
I drive too many miles to lease:
This may or may not be an accurate statement. Whether you purchase or lease, every mile you put on your vehicle reduces its value. When you purchase a car you end up with a car that has depreciated a great deal because of the excess miles. Now you have negative equity that you might have to carry to your new car loan, if you're trading before it's paid for. When you lease, you are able to build the excess mileage in upfront. This will make your payment higher but, generally it will cost less than paying for that depreciation at the end. Keep in mind that if you happen to trade before you're lease term is up these upfront mileage penalties are not refundable, and mileage penalties can be avoided entirely by trading, selling or buying the leased vehicle as the penalties only apply to vehicles that are turned in at lease 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. But how often, as an adult, have you actually held the title to your car in your hands. Most people never even see the title to their vehicles because they trade well before their vehicle loans are paid off. The bigger 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's 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. In my experience it is generally less expensive to lease a car than to purchase. There are a number of reasons for this, the biggest reason is that you don't have to deal with the potential for negative equity, the leasing company does. Some other obvious reasons are; lower monthly payments and lower down payment requirements. Our book, "The Insider's Secrets" can give you some specific comparisons on leasing versus buying. It is important to remember that, in most cases, leasing allows you to drive a vehicle you might not have been able to afford if you had chosen to purchase it instead.
I know someone who 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 were charged for damages. I can almost guarantee that you know someone who got ripped off in a purchase as well.
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. The best thing you can do to avoid having so much negative equity is to make sure you aren't paying too much for the vehicle in the first place.
I will owe too much at the end if I want to keep it.
This is true in most cases. The best thing about a lease is the fact that while a purchase gives you obligations, a lease gives you options. In a lease you have the choice to trade it, sell it, keep it or turn it in to the lease company. If the vehicle isn't worth what it would take to own it, turn it in and walk away. If you do have equity, you can capture it buy trading it, selling it or buying it. In a purchase you have one choice only, regardless of your equity position. And again, why would you want to keep it? One of the biggest reasons to lease in the first place is 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. The only real exceptions to this are; repainting, lowering, lifting or making any other significant changes to the integrity of the frame. If you add custom wheels or stereo systems, etc., be sure to keep the originals so that they can be replaced when you turn the vehicle in. Again, you only have to worry about any of this if you turn the vehicle in at lease end. In any other scenario, the accessories or changes made won't matter to anybody but you.
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. Leases are available on late model used cars as well as new. 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 as bad deal as many people would want you to believe. In the end it's a matter of personal choice.
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