Buy or Lease?
How to Figure Out if you Need an Auto Lease or Not.
Can’t afford that snazzy Bentley or BMW that you’ve been drooling over? That’s ok, you can always lease it.
To be perfectly honest I think leasing a car is a waste of money – furthermore it’s a façade. It lets you live in the auto bubble, meaning that you can suddenly drive a car that you can’t possibly ever afford to own. In a society where your car is your status symbol, it’s no surprise that 50% of those who drive around in cars that make us quiver with envy, can’t actually afford them. So why would someone spend their money to drive a car that they will never actually own? I’m convinced it’s because of how it makes them look and feel driving their status symbol.
Car dealers are well aware of how much we stereotype each other by the car we drive. If you drive a mini van you’re likely a soccer mom. If you drive a Viper you’re likely a brain surgeon. However it’s not the brain surgeons wasting their money on leases. It’s the guy who can’t afford to own a Viper, but who wants to make the world think that it’s bought and paid for. So the reality that car dealers would like to have us believe is that if you can’t afford the big shiny sports car, you will pay to rent it, or rather lease it. Really that’s what leasing is, it’s a fancy term for a rental car.
Car dealers are hoping that you are so blinded by the way you will look behind the wheel of that car, that you won’t even want to come to terms with the financial risks and waste that you’re agreeing to with a car lease. It makes sense really! You’re spending money to look like you can afford a car that you could never in a million years afford – in order to impress perfect strangers. If you can’t tell, I’m being sarcastic.
If you’re financial common sense could get a word in edge wise when you slip into that leather interior it would tell you that a luxury car is dubbed so because only 10% of the American population can actually afford them. And honey if you need to sign a lease in order to drive away in that luxury car – who are you fooling? At first glance leasing a car gives you the best of both worlds. It allows you to be seen in the car of your dreams, to present your fantasy self to the real world without breaking the bank. Sounds pretty good doesn’t it? You can still afford to retire, maintain your mortgage, and maybe even send your kids to college if you lease that $65,000 sports car instead of buying it. However just like the too-good-to-be-true persona the lease lets you portray to the world; the lease itself has some pretty hollow walls.
The truth about car leases exposed!
Your coworkers never need to know that you don’t actually own that $70,000 luxury vehicle you drive to work every day. However you are fully aware that you are only borrowing your dream car, or you will when your lease is up. Auto leases are typically based on a 1 to 3 year lease term (or length of time). When the lease on your car is up, you will either be expected to purchase the car or give it back!
Now let me paint a realistic picture for you. Regardless of if you decide to buy the car out at the end of the lease or give it back, you have already lost a ton of money.
If you decide to buy the car out - Don’t expect that any of your lease payments, or what I like to call your rental payments, will actually be considered when the dealer gives you a buy out price. The buyout price is known as the residual value on the car, and the residual value of your vehicle will far outweigh what the car is actually worth – especially now that you’ve driven it around for 3 years pretending it was yours.
If you decide to give the car back at the end of the lease period – You can expect to be hit with damage fees. I realize that you’ve been driving the car around for the last 3 years, treating it as if it were your own. So how can the dealer expect it to be returned in the exact condition it was in when it was brand spanking new – when you first leased it? I don’t know, it’s not realistic, but neither has your “car ownership” for the past 3 years. The dealer will expect that you return the car in new condition – that means no wear and tear, no scratches, bug splatters, scuffs on the bumper or chipped paint. It’s hardly possible now is it? However you better bet you will be charged damage fees for every little bit of wear and tear on the vehicle.
Ridiculous mileage fees - When you first signed your lease did you read the fine print about the odometer fees? No? Well then you better prepare yourself because a standard lease only covers the first 12,000 to 15,000 miles per year. If you exceed that amount within your first year of leasing, you will be charged what is known as an odometer fee – or 15 to 25-cents for every extra mile that you put on the odometer. That might sound realistic to you if you only live 5 minutes from you office. However what happens if you lose your job and get a new one that’s a 45-mintue daily commute each way? Or what if your child gets sick and you suddenly have to make daily trips to a specialist that is located an hour away? Life can’t be pre-measured in odometer mileage, so why would you ever sign a lease that limits how much you can use your vehicle. Before you sign a car lease rethink a decision that could cost you thousands of dollars on a car you will never own.
Accidents happen – If you’re worried about the wear and tear on a leased vehicle, what happens if you get into a car accident? You should be aware that your insurance company will only cover what they deem the value of the car at the time of the accident. That means you will still be responsible for paying out the rest of the lease – and what the dealership deems is the residual value of the vehicle – remember the buy out value that I mentioned above? You might also find yourself in a financial emergency if you lose your job. If you owned the car you could park it and take the insurance off of it, or worst case scenario – sell it. However if you’ve leased a vehicle you are still responsible for the lease payments even if you lose your job. You also can’t sell the vehicle. You can give it back to the dealership to sell it, but they will probably sell it to a dealership for much less than it’s worth and stick you with the bill for the residual value of the vehicle. Plus, you will still be expected to make payments until the lease is up.
Before you sign a car lease ask yourself:
- Do I need a new car or will my old car last another year?
- What am I trying to accomplish with this car – image, status?
- Is the image I want to portray worth the financial headaches of a lease?
- Do I need this particular luxury car or can I purchase a different make and model for less?
- Will leasing this car cut into my vital monthly finances – groceries, rent, mortgage, utility bills?
- Where do I see myself career-wise in the next 6 months? Year?
- Will I want to purchase this vehicle after 3 years? Will I lease another vehicle?
- After reading this article about the negatives of leasing a car, does a car lease still sound like a too-good-to-be-true deal?
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