ALT-1 Is it better to Lease a Car or Buy
Leasing is not well understood by most automotive consumers. Misconceptions are common. Bad advice spreads on the Internet.
Many automotive consumers who could benefit by leasing are often frightened away unnecessarily by misinformation and bad advice.
There is no short answer to whether it's better to buy or to lease. Leasing is not for everyone but can be a great solution for many.
Rather than simply repeat the pros and cons of leasing which has been already been addressed in articles on this site, let me instead address a few of the more common misconceptions.
1. "Leasing is for business use of an automobile, buying is for personal use."
This is a gross oversimplification that leads to the wrong conclusion.
Although leasing was originally a form of business equipment financing, in the 1970's it was introduced by car manufacturers and large banks as a method of financing personal vehicles.
Leasing has been hugely successful because it offers consumers a way to make automobiles more affordable - and a way for some to get in trouble because they agreed to it without understanding how it works.
The best and easiest advice for those who don't understand how leasing works, don't know how to determine if they are good candidates for leasing, and aren't willing to learn, is simply not to lease.
2. "Leasing is like renting; you spend a lot of money and have nothing to show for it in the end."
Leasing is actually quite different than renting, but it's true that there's nothing in the end to show for it.
However, those who make that statement imply that when you buy with a loan, somehow that same money is not thrown away.
Not true.
Leasing pays for a vehicle's depreciation in value over the term of the lease. Most cars lose 50% of their original value over 3 years. That's why lease payments are only (about) 50% of loan payments for the same car, same term.
However, when you buy with a loan and, say, want to sell your car after 3 years, you'll only get 50% of the money you paid for the vehicle (ignoring financing costs). The 50% that is lost is the SAME 50% that a leaser pays. Cars depreciate in value regardless of whether they are leased or purchased. You lose the same money either way.
3. "Leasing makes dealers more money, which is why they push it so hard."
This is usually true - but not because leasing inherently provides more profit, but because many customers don't understand leasing and therefore allow the dealer to manipulate the deal to his advantage.
Leasing is more complex than buying with a loan, and it's easier to make mistakes. The best advice once again is: if you don't understand leasing and don't want to learn, just don't do it. However, if you do want to learn about leasing and if you might benefit from it, LeaseGuide.com is a good place to start.
